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Depreciation

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Level 2

I am preparing 2019 Corp 1120 Tax Return with a prior year (2018) vehicle owned by the Corp. (single member)

1. Passenger vehicle

2. Used 80% of the time for business

3. Placed in service 2/12/2018 

4. Did not take any bonus depreciation 

2. No section 179 

Does the Corp have to elect out of Section 179?

 

Thank you,

LaDonna Powell

 

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14 Replies 14
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Level 15

179 itself is an election. There is nothing to elect out of. Also, it is only applicable for the year an asset is placed in service.


ex-AllStar
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Level 3
Level 3

Actually the property is not eligible to begin with as it was not acquired from an unrelated party which is one of the requirements under Section 179.

Additionally, while used property is eligible, under Section 351, when contributed the holding period tacks, so this property contribution would not apply as it is really just a carryover from the sole proprietorship.

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Level 15

@Rick19744  I know we have to use our mind reading skills to answer  a lot of questions here but I don't see where you got acquired from a related person and Section 351.


ex-AllStar
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Level 3
Level 3

Moving from a sole proprietor to a C corp tax free is accomplished under the provisions of Section 351.

Section 179 is allowed for new and used and just to be clear here, while this may appear to be used property for the C corp, Section 179(d)(2) provides that property purchased from a related party is not eligible property.

So just covering all bases here that even if the C corp "purchased" the property, it is not eligible as noted above.

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Level 15

I know the rules. I just think you are reading more into this than is there. I do not see where a sole proprietor incorporated their business. OP is not commenting. Maybe you are right.


ex-AllStar
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Level 15
Level 15
maybe the term "single member" in the original post ?

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 15

Yes, that term mucks things up.


ex-AllStar
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Level 3
Level 3

In reading again, I do agree that I may have misread the original post; twice.  I read it as if the vehicle was owned in 2018 by the single member and this was a sole proprietor and now it is a corporation.

Thanks for pointing that out.

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Level 15
Level 15
we may never know for sure!

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪
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Level 2

Sorry, I should have never typed " single member"  1120 Corp never a Sole Proprietor.  Sorry for the miscommunication.

 

I am having trouble producing the depreciation schedule. 

 

 

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Level 3
Level 3

Forgiven.  Just don't do it again (humor in case it is not apparent).

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Level 10

@lptax wrote:

2. Used 80% of the time for business


Maybe there's more than one way to do this correctly, but how does a corporation have 80% business use of a vehicle?  I've always done 100% business use and included any personal use in the employee/owner's W-2 as a taxable fringe benefit.

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Level 15

Same here. 


ex-AllStar
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Level 10

@lptax wrote:

4. Did not take any bonus depreciation 

There is a written election required (in this case filed with the 2018 return) to opt out of bonus depreciation.