Semi depreciation

[oceanlovin'ea]

If client bought a tractor (semi) and tried truck driving and had terrible year and went back to previous job and you knew he had the semi for sale and wasn't going to use truck anymore and would just have to recapture depreciation on next tax return, are you required to take the depreciation deduction? (I know long question)

Client's husband decided he wanted to drive a semi last year. He bought a tractor for $11,500 and started to work for a company driving long distance. Long story short, he had a lot of repairs on the tractor and gas prices!!, so they had a huge loss. He went back to welding so they could pay their bils.
In addition to all the expenses the tractor was stolen in March and stripped.

Not a good year for them at all. The loss on the Schedule C was almost as much as the wages he earned welding so they had very little earned income which meant very little EIC. No Child Tax Credit as no taxable income and no Additional CTC since their earned income wasn't about $11,000..

Took money out of his 401K so had a penalty to pay on top of everything else.

So I would like to make this year better if possible by not having to recapture depreciation in 2007 if they don't claim it in 2006. Hope I am making sense. Brain is really tired now.

Thanks

Linda F

[winnie]

in service

If the trailer was no longer in service, you don't need to depreciate it anymore.

[jainen]

due diligence rules

>>not having to recapture depreciation in 2007 if they don't claim it in 2006<<

Remember that depreciation is only recaptured to the extent of gain, of which he may have none. If you determine that he took it out of service in the same year that he started, there is no depreciation. Otherwise it is mandatory. You can use SL ADS for a little less deduction, but you have to claim something or you get in trouble with the EIC due diligence rules.