Client is an S corporation and places a 4 door auto worth $25,000 in service on 01/01/2018 into the S corporation as a capital contribution. The auto was purchased in 2014 and used for personal reasons prior to 2018. Can the S corporation claim bonus depreciation on the auto as a listed property.
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To clarify the auto was purchased by the owner of the S corporation in 2014. He later started an S corporation in 2017 and under a Section 351 contribution to the S corporation dropped the auto as an asset. The auto was used for business purpose after the capital contribution. -
Corporation acquired and placed auto in service in 2017. He can take up to $8000 bonus dep"Dude, you are correct" Rapid RobertComment
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Is it not $18,000 for 1st year with special depreciation for vehicles.Comment
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I'm not sure if it qualifies for Bonus depreciation.
Although I'm not sure if it directly applies, §168(i)(7)seems to treat the individual and the corporation as one person for purposes of depreciation. *IF* that is the case for Bonus depreciation, this transaction would seem to not qualify for Bonus because "used" property does not qualify if it was previously used by the taxpayer.Comment
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I thought under the TCJA bonus depreciation would apply to used property also?Comment
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It applies to newly purchased 'used' property. It does not apply to property previously used by the same person.
"original use [brand new] of which begins with the taxpayer or the acquisition of which by the taxpayer meets the requirements of clause (ii) of subparagraph (E)"
"(ii) Acquisition requirements An acquisition of property meets the requirements of this clause if such property was not used by the taxpayer at any time prior to such acquisition, and (II) the acquisition of such property meets the requirements of paragraphs (2)(A), (2)(B), (2)(C), and (3) of section 179(d)."
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What is the code section that you have quoted aboveComment
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If we define "used" as having a depreciable interest in the property ( whether or not actually depreciated), with a car used for personal purposes do you have such an interest?"Dude, you are correct" Rapid RobertComment
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§168(k).Originally posted by Florida_EA View Post
However, Dude's comment 'sparked' a memory in my mind, and my previous comments were wrong. Sorry for the confusion.
Although the literal reading of the Code would seem to disallow a property previously owned by the same person, the Proposed Regulations interpret it slightly differently. They interpret it as having a prior depreciable interest in the property.
(B) Property was not used by the taxpayer at any time prior to acquisition--
(1) In general. Solely for purposes of paragraph (b)(3)(iii)(A)(1) of this section, the property is treated as used by the taxpayer or a predecessor at any time prior to acquisition by the taxpayer or predecessor if the taxpayer or the predecessor had a depreciable interest in the property at any time prior to such acquisition, whether or not the taxpayer or the predecessor claimed depreciation deductions for the property.
As for your comment about $18,000, it would usually be Bonus depreciation of $8000, plus $10,000 of regular depreciation. However, if the vehicle was acquired before September 28th, 2017 and then "placed in service" in 2018, §168(k)(2)(F)(iii) limits the maximum Bonus is reduced to $6400 (§ 168(k)(8) also limits Bonus to 40% of the Basis).
Again, I'm not 100% sure if the this situation is treated as being the same taxpayer or not, but I suspect it may fall into that category.
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Owner of the S corporation used the auto 100% for personal use so I am not sure if that use would have any depreciable interest prior to him putting it into the S corporation.Comment
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According to pages 10-4 and 10-5 in TTB, it appears the vehicle would have been considered placed in service in 2014 and therefore not eligible for either bonus depreciation or Section 179. There is an example showing this as well.Comment
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What does TTB stand for?Comment
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