Self-employed bus driver

[Questionguy101]

Taxpayer is a self-employed bus driver. He owned his own bus.

On the last day of 2007 (12/31/2007), he paid more than $12,000 to buy parts for major overhaul of the bus and the job was not completed until mid-Feb 2008.

How should the $10,000 be claimed? I think since the major overhaul has definitely increased the value of the bus and extend it's useful life, the $12,000 has to be depreciated. And the starting depreciation date would be mid-Feb 2008, the date that the overhaul job was done and 'put into service'.

What's your opinion? Thanks.

[Gretel]

My thoughts. Depending on what exactly was done it might be a repair. If capitalized then I would agree with the Feb. date.

[Koss]

Could be repair/maintenance

I agree with Gabriele.

If the guy is on the cash method of accounting, and actually paid for it during 2007, then it would be fully deductible in 2007 if you treat it as maintenance.

Whether it is maintenance or a capital expenditure is based on various factors. You may want to review the thread linked below:

http://www.thetaxbook.com/forums/showthread.php?t=8526&highlight=Depreciation+Question

[ChEAr$]

However

merely buying the parts and letting them languish on a shelf in back room is not the
same as placing them in service, even if we have repairs instead of capitlized expenditure.

Of course i could ask myself the same question re a case of paper at 28$ that I buy
December 29th before tax season.
But i don't.