Depreciation

[lptax]

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

[sjrcpa · Accepted solution]

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.

[rbynaker]

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@lptax wrote:

2. Used 80% of the time for business

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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.

[rbynaker]

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@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.

[sjrcpa]

Same here. 

[Rick19744]

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.

[sjrcpa]

@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.

[Rick19744]

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.

[sjrcpa]

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.

[Just-Lisa-Now-]

maybe the term "single member" in the original post ?

[Rick19744]

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.

[Just-Lisa-Now-]

we may never know for sure!

[sjrcpa]

Yes, that term mucks things up.

[lptax]

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. 

[Rick19744]

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

[lptax]

Yes it does. Sorry about that!

[qbteachmt]

That's weird; this topic in List view shows it is all current, but here, only the last remark is current?

You realize this is 100% corporate vehicle, but 20% use is payroll taxable to that user? There is no 80% corporate when it is corporate-owned.