Section 179 -- begin when?

[Black Bart]

Client is a self-employed (C) truck driver who bought a new truck at the last of '07, but did not put it into service until January ''08. Haven't done tax yet, but it could go either way and I want to be sure of options if there are any.

The contract and the check (paid in full) are dated December, but as I read it depreciation begins when the equipment is put in service, Now ordinarily if somebody lists equipment purchased I assume it's for the current year, but this guy says he didn't use it 'til January, so I'm thinking I'll just 179 it in '08. I know there's a rule about not being able to take 179 on assets you already own and start using in a business and that sort of technically applies, but I don't think it was meant for cases like this.

So...is there anything about S-179 to keep us from taking it on the '08 return as if he had bought it then? And just in case he needs it for '07, is there any way to 179 it now?

[Edsel]

Purchased when?

Client is a self-employed (C) truck driver who bought a new truck at the last of '07, but did not put it into service until January ''08. Haven't done tax yet, but it could go either way and I want to be sure of options if there are any.

The contract and the check (paid in full) are dated December, but as I read it depreciation begins when the equipment is put in service, Now ordinarily if somebody lists equipment purchased I assume it's for the current year, but this guy says he didn't use it 'til January, so I'm thinking I'll just 179 it in '08. I know there's a rule about not being able to take 179 on assets you already own and start using in a business and that sort of technically applies, but I don't think it was meant for cases like this.

So...is there anything about S-179 to keep us from taking it on the '08 return as if he had bought it then? And just in case he needs it for '07, is there any way to 179 it now?

I think s.179 are for cash purchases during the year of purchase, but I don't know about a purchase in December of '07 for a truck he didn't "place into service" until '08. This is the kind of thing I always give the client the benefit of the doubt unless I can find something specific. One problem in using s.179 during the first year is often the client doesn't have enough profit to accommodate it. Don't know this guy's specific situation, but the odds are overwhelming if he's still driving a truck in '08, he will need the deduction worse in '08 than in '07.

[tax info man]

179

To take the 179 it has to be purchased in the year you want to take it for. You can start depreciating it in 2008 but this property will not qualify for the 179 deduction.

[veritas]

Page 9-14 of TTB

"Under IRC Section 179, individuals, partnerships, and corporations
may elect to deduct as an expense the cost of qualifying
property in the year the property is placed in service. The amount
claimed as a Section 179 expense reduces the basis of the asset for
purposes of computing regular depreciation."

[Black Bart]

Don't be discouraged, tax info man

To take the 179 it has to be purchased in the year you want to take it for. You can start depreciating it in 2008 but this property will not qualify for the 179 deduction.

One of the dangers of postin' one of those "off-the-top-of-my-head" statements is that somebody like our right-leanin' Left Coaster (Veritas) there will slap you with an IRS quote (happens to me all the time) and it sure is demoralizin' ain't it? But don't throw in the towel and run off -- heck, the place is full of semi-knowledgeable folks (me for instance) and one more won't hurt anything.*

Besides, I think people that go strictly by the rules (somebody who won't take estimates of expenses, for example) are just a bunch of pompous stuffed shirts, don't you? Shoot, if we couldn't wing it about half the time, how would we ever get anything done? So anyway, stick around; and it's been nice talkin' to you.

*Reminds me (naturally) of a joke -- ever heard that one about the guy who never went to church sayin' "Well preacher, I would come to church, but there's just so many hypocrites there" and the parson replies "Oh that's no problem, one more won't hurt anything." (Smiley per courtesy of BHoffman).

P.S. Hey Harlan -- read up on BHoffman's smiley-postin' instructions and you can stop typin' in "Grin." (fun, ain't it?)

[solomon]

From Reg. 1.179-4(e):

(e) Placed in service. The term placed in service means the time that property is first placed by the taxpayer in a condition or state of readiness and availability for a specifically assigned function, whether for use in a trade or business, for the production of income, in a tax-exempt activity, or in a personal activity. See §1.46–3(d)(2) for examples regarding when property shall be considered in a condition or state of readiness and availability for a specifically assigned function.

Here is link to §1.46-3

http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=5aff1df7929ba6b2015ba0cea18490ca&rgn=div8&view=text&node=26:1.0.1.1.1.0.7.113&idno=26

[erchess]

OK Just so I am clear

The truck was ready for use at the end of the year so if there is going to be a Sec 179 Election to expense it must be taken for that year but if this is not taken then depreciation write off can wait until it is actually used if desired? Could depreciation also be done for the last month of the year?

[okie1tax]

Is it a 5 yr truck or a 3yr truck? Do you need 100% this year or would 50% this year and 25% next year work?

[Black Bart]

Mid-quarter / three years.

...Could depreciation also be done for the last month of the year?

Yeah, the rule is it's mid-quarter stuff (and greatly reduced depreciation) when assets purchased October 1st or later total 40% of all purchases (and this does).

Is it a 5 yr truck or a 3yr truck? Do you need 100% this year or would 50% this year and 25% next year work?

It's a three year truck, but (ha-ha) you sound like me and my customers -- whatever year you need it decides the answer to the question (award yourself one smiley face ).

[Black Bart]

Eureka!

I went and looked that up -- turns out it's Greek and means "I have found it" (I didn't know it either -- let's consider ourselves enlightened). Anyway, now I know why Frankenstein and the mad scientists ran around screamin' it -- I feel the same way. You've heard "When all else fails, read the instructions"? Well...on page 16 of IRS Publication 946 "How To Depreciate Property" it reads:

You begin to depreciate your property when you place it in service...You place property in service when it is ready and available for a specific use...Even if you are not using the property, it is in service when it is ready and available for its specific use.

Isn't that just like IRS to muddy up the water? Any ordinary human bein' would think "placed in service" means "placed in service," that is, when you actually start using something, but not them -- it's in service when it's ready for service.

P.S. To give credit where credit's due I think erchess said it first in one sentence back there ("ready for use"), but I didn't catch it.

[snowbird]

BB ... you did not say what kind of truck, only "self-employed (C) truck driver ", if it was an over the road truck, it probably was not ready to be placed in service by end of the year, there are licenses , permits, fuel tags and a host of things I know little or nothing about before you can drive the truck. If it is a delivery type van used locally, there may still be things necessary ... like a coffee cup holder

[Lion]

Good Grief!

Good grief. Everyone has learned to smiley!

[Black Bart]

Truck drivin' 'n' smilies

Good grief. Everyone has learned to smiley!

Ain't it wonderful? I finally found a technology level I can handle. *

*Courtesy of BHoffman

BB ... you did not say what kind of truck, only "self-employed (C) truck driver ", if it was an over the road truck, it probably was not ready to be placed in service by end of the year, there are licenses , permits, fuel tags and a host of things I know little or nothing about before you can drive the truck. If it is a delivery type van used locally, there may still be things necessary ... like a coffee cup holder

Big truck/tractor-trailer -- three year class. He got all that stuff done before year's end, but still did not drive it on the job in '07. Nevertheless, accordin' to my IRS rulebook, it's '07 property since it was ready for use. I did the return -- it turns out he didn't need 179 or even regular depreciation and mid-quarter convention kicked in giving us just a little dab of deduction, so everything worked out fine and we didn't waste any depreciation. Thanx to all for your replies.**

**Courtesy of BHoffman

[BHoffman]

Cut it out with the "Courtesy of BHoffman" thing

If the IMG code thingie was "on" I could really wow ya.

[Black Bart]

Okay,

Cut it out with the "Courtesy of BHoffman" thing

If the IMG code thingie was "on" I could really wow ya.

but I wasn't makin' fun of you and was just givin' credit (with a little twist on it) where credit's due (wasn't gonna do that from now on). Here's your smilies back...

_______________________________
"No Woman, No Cry" -- Bob Marley