Change in %Vehicle Business Use

[equinecpa]

I'm doing a return for a client who used her vehicle approx 95% biz use in prior years. It's a large truck over 6500#.

Last year she incorporated part of the business so some of the vehicle usage was allocated to the corporation (she charged a mileage allowance). So on the Schedule F she now has approx 55% business use on this vehcile. She has always claimed actual expenses.

My program is not calculating an allowable depreciation this year. I believe it is because if I add all the depreciation taken in prior years it exceeds 55% of ACB. Is this correct, no depreciation allowable? I would have thought that the program would calculate depreciation this year, and then allow 55% as a deduction.

Thanks

Carolyn

[JG EA]

I had this question years ago (if I understand what you're asking). What I thought I should do was figure it out by hand when the depreciation % changed year to year to see what the correct current year depreciation would be and then put it in as an override. It does seem my program only takes into consideration basis x % for the total allowed and does not take into consideration previous years bus %. However, some answered that if the current year exceded the total basis then no deduction was allowed. But the way I looked at it was if the first two years were at 100% say and the third was 55% then I would say there was still basis left for the third year because there was more basis in the 1st two to justify the deduction. e.g. 5 year property:
1. $1000 x 100% = $1000 x 20% = $200
2. $1000 x 100% = $1000 x 32% = $320
3. $1000 x 55% = $550 x 19.2% = $106
For the third year should the depreciation be limited to the $550 and since $520 was already taken = $30? It doesn't seem right to me. But I could be wrong - it has happened.

[veritas]

My understanding

by the original post is the vehicle is not in the corporaion.

Is the total business use of the vehicle both corporate and Sch F still 95%?

[equinecpa]

Yes vehicle is owned personally and is used as follows:

5% personally
55% sole proprietorship
40% used for corp (charged as standard deduction)

Program is not calculating depreciation and is giving me an error that prior dep'n is too high for prior years-I'm thinking that this program (Intellitax) takes the 55% of ACB and then calculates all dep'n.

However I do think the client is entitled to a dep'n claim this year.

JG-the way you've typed is out is the way I'm thinking it should be done but I don't know that it's right either!

Incidentally: I jus tried the same scenario in Taxworks and it uses basis too...