A company purchases Cement Trucks and leases them to another company. Should they be depreciated as equipment or vehicles. Is Sec 179 deduction allowed?

[jpbrehm]

The company is leasing these trucks to another company so are not actually using them for their business but are generating income from them.

[taxiowa · Accepted solution]

The company business is leasing trucks.  So the company did purchase and actually use them for their business.  Since they are not used by company as a vehicle, I would list them as equipment.  Thus you can depreciate or Sec. 179 the cement trucks as any other business asset.

However the only caveat in this type of business is terms of the lease.  If short term, temporary or operating lease then all is good to go for 179 deduction.  If the company leases the vehicles out in a capital type lease, it is really considered a sale by the company to the lessee.  Then 179 may be denied or required to be recaptured on the sale if it is a capital lease/sale.

[jpbrehm]

Thank you.  Exactly what I had thought but wanted to verify that my approach was correct.  Did not consider the lease agreement however so will have to check on that.