List Computer in 2017 or 2018?

[ttbtaxes]

If the De Minimus election is made, I would compare the computer to an invoice for advertising because you've elected to treat that computer as a business expense under Section 162. You paid part of the invoice in 2017 and part in 2018. They are deductible in the amounts and years paid.

As TaxGuyBill pointed out, the unpaid amount at 12-31-17 is not akin to a purchase by credit card which is a three-party transaction. The OP engaged in a two-party transaction and the unpaid balance is an Account Payable deductible in 2018.

[TaxGuyBill]

My. 02. Since he had the computer in 2017 and placed it in service in 2017, it need to be listed 100% on the 2017 tax return.

What we had is a partial payment with a small Line of Credit, no different if he put the rest of it on a credit card.


Chris

If the De Minimis Election is used, it is not an "asset", and there is no "placed in service" date. It would be a supply. It is like ordering business cards on December 30th, 2017, but not receiving them until January 2nd 2018. That "supply" would be deductible in 2017 because that is when it was paid.


A direct Line of Credit with the seller is NOT the same as a third-party credit card. The deduction is for when the payment is made to the seller. In a Line of Credit with the seller, the seller received part in 2017 and part in 2018. With a credit card, the full payment to the seller was made in 2017 (via the credit card).

[spanel]

My. 02. Since he had the computer in 2017 and placed it in service in 2017, it need to be listed 100% on the 2017 tax return.

What we had is a partial payment with a small Line of Credit, no different if he put the rest of it on a credit card.


Chris

[ttbtaxes]

The OP told us she put it in service in 2017. How do you unring that bell?

[taxea]

I paid $750 as a deposit and $925 for the remainder in 2018. I really don't need the deduction for this year, but will in 2018. So I would rather use it for 2018.

Then put it in service 01/01/18 and take the depreciation/full deduction in 18

[ruthc]

Expense when paid!

Expensing the amount in each year paid with the safe harbor would work for me too. I wasn't sure what to do seeing it's for one computer, but 2 payments (each payment in different years). Thanks

[Kram BergGold]

I agree with ttbtaxes

If you depreciate or claim 179 then you write off the entire cost.
If you use the safe harbor you only write off what you paid in 2017.

[ttbtaxes]

Under what provision can you deduct all of it in 2017?

If you treat it as an depreciable asset, then, under Reg. 1.461-1(a)(1), you can entirely write it off in 2017 under Section 179 or through bonus depreciation. If you make the De Minimus election, then pursuant to Sec. 1.263(a)-1(f)(3)(iv) you've treated the computer neither as an asset nor a material and supply. Instead, when making the election, you agree to deduct it under Reg 1.162-1 in the taxable year the amounts are PAID provided the amounts otherwise constitute deductible ordinary and necessary expenses incurred in carrying on a trade or business.

Therefore, if you are treating it as a trade or business expense, only the amount paid in 2017 would be deductible, not the full amount, because you are a cash-basis taxpayer. Sec. 1.263(a)-1(f)(7) Example 9 discusses the treatment of the election as a trade or business expanse.

[ruthc]

Agree...

At this point, after reading everyone's response, I tend to agree with Robert. It was ready for use in 2017. Just because I didn't get the invoice until 2018, it was partially paid for in 2017. I will use the safe harbor election and put everything in 2017. Thank you everyone for your responses. have a great week!

[Rapid Robert]

In order to qualify as a material or supply, doesn't the unit of property

De Minimis Safe Harbor election, item is expensed if company policy is to expense items under $2,500. 1.263(a)-1(f)

[ttbtaxes]

I agree with the first part but am not sure if this is still true if treated as supply, computer being under $2,500.

In order to qualify as a material or supply, doesn't the unit of property have to have a useful life of less than 12 months? Take a look at Reg. 1.162-3(c)(1)(iii).

[Gretel]

Interesting Question

For a cash-basis taxpayer, it is irrelevant when the asset was paid for pursuant to Reg. 1.461-1(a)(1). The computer was placed in service in 2017 and thus that is the year depreciation/expense commences. The $1,675 would be shown in 2017 and either depreciated or expensed.

I agree with the first part but am not sure if this is still true if treated as supply, computer being under $2,500.

[ttbtaxes]

For a cash-basis taxpayer, it is irrelevant when the asset was paid for pursuant to Reg. 1.461-1(a)(1). The computer was placed in service in 2017 and thus that is the year depreciation/expense commences. The $1,675 would be shown in 2017 and either depreciated or expensed.

[ruthc]

The amounts were....

I paid $750 as a deposit and $925 for the remainder in 2018. I really don't need the deduction for this year, but will in 2018. So I would rather use it for 2018.

[Rapid Robert]

What was the amount of the deposit, and what was the amount paid with the invoice? Why not just report each amount in the year paid, surely this is within your book accounting (DMSH) expenditure amount.