Extended Service Contract

[mwarney]

$1,200 for an extended warrantee was added to purchase price of new SUV (purchased for business) and using "actual expense" method. I'm thinking this should be added to the basis?

[Kram BergGold]

Amortize

I would amortize the warrenty over the number of years it covers.

[ChEAr$]

And I would

I would amortize the warrenty over the number of years it covers.

add it to basis.

Somewhere we talked about this before. hmmm....?

[BOB W]

This can go either way. When the truck is sold, ultimately, the sales price would include the warranty if still within the warranty period. Listing it separately would only make the sale for two items instead of one. Amoritizing the warranty would take longer than depreciation and rightly so, if greater than 5years. but most warranties are shorter than depreciation.

So I guess that combining it with the purchase price may depend on the period of time of the warranty> longer or shorter than depreciation. Shorter= more annual deduction> Longer = less of an annual deduction.

Where does the IRS stand on this? I believe they say to include all purchase costs as basis.

[veritas]

really

an extended warranty is insurance.

I would handle it the same way you treat insurance.

See page 8-23 on treatment of prepaid expenses.

[S T]

Extended Warranty

I usually amortize separately from vehicle. As the warranty period is usually 3 years on extended, I guess some could be 5 years or more these days.

Sandy

[oceanlovin'ea]

Extended warranty on computer

I was wondering how to handle the extended warranty I got with my new laptop. I hadn't gotten around to researching it yet. I think it is a 3 year warranty.

Thanks for the information.

Linda F

[mwarney]

The Warrantee is 5 years or 100,000 miles (which ever comes first). The length of time is undetermined at this point so amortizing over a fixed period would not be accurate. Of course the primary concern here is not what I feel is accurate but how the IRS wants to see it.