Is there any issue with including listed property with cost under $500 as Supplies for a Sch C business that has a capitalization policy to expense items under $500 or with useful life < 12 month and where the taxpayer is electing the De Minimis Safe Harbor? It seems like doing so would defeat the whole purpose of listed property from the IRS's point of view b/c they lose visibility to it and the recapture provisions associated with it when business use drops below 50%. Is there a rule I missed that prevents a Sch C business from using DMSH for listed property?
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The only problem I can see is if the business use is going to be less than 100%. -
I am not sure listed property is still listed property under the new de minimus rules. It is likely that this election can be made only for 100% biz use. At least I would not dare to make this election if it wasn't.Comment
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[QUOTE=Gretel;169605]I am not sure listed property is still listed property under the new de minimus rules. It is likely that this election can be made only for 100% biz use. At least I would not dare to make this election if it wasn't.[/QUOTE
Gretel - Agreed.Comment
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The DMSH election, if elected, applies to all purchases, doesn't it? I didn't see anything in the regs calling out listed property as an exception. I only even see listed property referenced in the regs under the GAA changes (can't group listed property in a GAA with non-listed property). So you're saying electing DMSH would have you expense items <=$500 unless they're listed property with business use < 100%? What if business use changes in a future year (say to 90%)? Or what if it was 100%, expensed under DMSH and then the business use drops to < 50%? If it's not on a depreciation schedule somewhere, regardless of the initial business use, it seems like it would get lost.
It seems to me that either:
1) Listed property is excluded from the DMSH (I haven't seen this in the regs or in any of the dozen of reg interpretations I've read).
2) There really is no such thing as listed property with purchase value <= $500 anymore because there's no way to track it from year-to-year (I can't believe this is the IRS's intent).Comment
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TomJ -
I think you are going to have to make a judgment call here. Suppose the taxpayer purchased a laptop computer that would be used 25% for business on average. I do not think the intent (my opinion only) of the DMSH would allow that taxpayer to deduct the entire cost of the computer using the DMSH. I agree that there is nothing (that I have noticed) in the Regs that addresses such items.
What I would do in this situation........Ask the taxpayer the percent of personal use they expect and don't deduct that amount under the DMSH (that is just opinion given the lack of guidance). If the personal use changes, who knows what to do?Comment
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"Ask the taxpayer the percent of personal use they expect and don't deduct that amount under the DMSHI"
I am confused with your last sentence. You would NOT deduct under the DMSH regs? Does that mean you would record as listed property? If so, I see no problem with changing personal use each year as applicable.Comment
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