Dan Posted February 8, 2015 Report Share Posted February 8, 2015 I am looking at a tax return that another tax professional has done. Here is what I see. 1. 2008 F350 PU bought new cost $40,126 2. The PU was placed in service 02/12/2008 the same day bought. No problem yet. 3. The class and life of the asset was Macrs 5 (recovery period of 5 years) 4. The method and convention was S/L and HY 5. In 2012 the prior depreciation was $24,075 6. In 2013 the depreciation was $4,013 7. Adding 5 and 6 together you get the total depreciation to be $28,088 What do you do about the other depreciation of this asset-- $40,126 -- 28,088 = $12,038 Looking for your reply. Thanks! Quote Link to comment Share on other sites More sharing options...
ILLMAS Posted February 8, 2015 Report Share Posted February 8, 2015 Sometimes folks use vehicles for personal use, looks like the TP used it about 40% for personal use. Quote Link to comment Share on other sites More sharing options...
Dan Posted February 8, 2015 Author Report Share Posted February 8, 2015 Sorry, I forgot one thing: The tax return has the PU at 100% business use. Quote Link to comment Share on other sites More sharing options...
mcb39 Posted February 8, 2015 Report Share Posted February 8, 2015 Could he have replaced another, older truck that was already depreciated out? Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 8, 2015 Report Share Posted February 8, 2015 The personal use % could have changed every year. Unless you can look at each year's tax depreciation schedule, the only thing you can do is assume that the remaining undepreciated balance is due to the accumulation of personal usage. 1 Quote Link to comment Share on other sites More sharing options...
Lee B Posted February 8, 2015 Report Share Posted February 8, 2015 Second thought, it's not uncommon for the annual depreciation limits to result in the depreciation of a vehicle for some years beyond its MACRS life. 8 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted February 8, 2015 Report Share Posted February 8, 2015 cbslee is correct. You would enter the business % used and keep depreciating it. Quote Link to comment Share on other sites More sharing options...
Dan Posted February 8, 2015 Author Report Share Posted February 8, 2015 The PU was bought new and placed in service the same day according to the tax return. (2-12-2008) When I put the information in the ATX program Asset Information worksheet under fixed assets I do not get any amount in current depreciation. How can you enter the business % used in the asset information worksheet program and keep depreciating it? The tax return used the 100% use when it figured the 2013 deduction of $4,013 If I would go back, starting with year 2010 through 2013 I would have these numbers ($8025 for 2010) ($8025 for 2011) ($8025 for 2012) ($4013 for 2013) The total of this is $28088 which is the amount of depreciation claimed on the 2013 tax return. Of course the above leaves out years 2008 and 2009 It has a 5 year recovery period on the 2013 tax return. Quote Link to comment Share on other sites More sharing options...
TaxmannEA Posted February 9, 2015 Report Share Posted February 9, 2015 An F350 pickup should not be listed property due to the GVWR rules. It looks like it was marked as listed property on the system and treated accordingly. 1 Quote Link to comment Share on other sites More sharing options...
jklcpa Posted February 9, 2015 Report Share Posted February 9, 2015 TaxmannEA is correct about the GVWR of and F350 because that would be around 10,000 lbs. It sounds like it was all handled improperly from the beginning. The rule is that only for passenger automobiles with unrecovered basis at the end of the recovery period, those can continue to depreciate the automobile if it is still being used in the business. For listed property other than passenger autos, the depreciation stops at the end of the recovery period. It does look like your asset was entered as listed property, possibly with the first year using the mileage method and then switching to actual expense method. When that happens before the vehicle is fully depreciated, the straight line method must be used over its remaining estimated useful life, otherwise MACRS is the required method. So it would seem that since you have SL method, that might be what happened...unless that was an error also. 2 Quote Link to comment Share on other sites More sharing options...
Dan Posted February 9, 2015 Author Report Share Posted February 9, 2015 I was able to get all tax returns (2008, 2009, 2010, 2011, 2012, 2013). The tax returns from 2008 through 2010 used 40% business use. 1. 2008 at 40% business use was $1605 2. 2009 at 40% business use was $3210 3. 2010 at 40% business use was $3210 4. 2011 at 100% business use was $8025 5. 2012 at 100% business use was $8025 6. 2013 at 100% business use was $4013 Question: Does this mean that no more depreciation can be taken on this pickup? My thought is no more depreciation can be taken. The 5 years of depreciation are gone. What would you do? Thanks to everyone that responded to this post. Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted February 9, 2015 Report Share Posted February 9, 2015 You just have to manually override the depreciation every year until it's done or sold. Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted February 10, 2015 Report Share Posted February 10, 2015 This is from the CCH U.S. Master Depreciation Guide. 169A. Hope this helps. Increased Business Use After Recovery Period Depreciation on MACRS property that is used only partially for business or investment purposes does not necessarily end upon expiration of an asset’s recovery period. Additional depreciation may be claimed if the percentage of business or investment use in a tax year after the recovery period ends exceeds the average percentage of business or investment use during the recovery period (Code Sec. 168(i)(5); ACRS Prop. Reg. § 1.168-2(j)(2)). No MACRS regulations have been issued detailing the computational rules. However, a similar rule applied under ACRS (Code Sec. 168(f)(13) (pre-1986)) and was explained in ACRS Prop. Reg. § 1.168-2(j)(2). This rule, however, does not apply to listed property described in Code Sec. 280F at ¶208 (Temporary Reg. §1.280F-4T(a)). Under Prop. Reg. § 1.168-2(j)(2), a taxpayer determines the average percentage of business/investment use during the recovery period. In the first post recovery period year that the percentage of business/investment use is greater than the average percentage of business/investment use, a depreciation allowance is claimed as if the property were placed in service at the beginning of that year. The deduction is computed by multiplying the original cost as reduced by prior depreciation (or the fair market value at the beginning of the tax year if this is less than cost reduced by prior depreciation) by the first-year recovery percentage. This amount is then multiplied by the percentage by which business/investment use for that year increased over the average business/investment use during the prior recovery period. The same procedure is followed for each subsequent year in the “second_ recovery period. For any year in the “second_ recovery period that business/investment use does not exceed the average business/investment use for the first recovery period, no deduction is allowed. The total depreciation that a taxpayer may claim may not exceed the original cost of the property. If the original cost is not recovered during the “second_ recovery period, then the process may be applied to a “third_ recovery period. The average business/investment use, however, would be redetermined by taking into account all of the years in the first and second recovery periods. Example (1): A calendar-year taxpayer places an item of 5-year MACRS property costing $1,000 in service in 2007. The half-year convention applies. Assume that business use during each year of the recovery period (2007-2012) is 50% and that deductions were claimed as follows: Year Calculation Deduction 2007 $1,000 × 20% × 50% $100.00 2008 $1,000 × 32% × 50% 160.00 2009 $1,000 × 19.20% × 50% 96.00 2010 $1,000 × 11.52% × 50% 57.60 2011 $1,000 × 11.52% × 50% 57.60 2012 $1,000 × 5.76% × 50% 28.80 Total $500.00 Assume that business use is 60% in 2013, 40% in 2014, 60% in 2015, 70% in 2016, 60% in 2017, and 20% in 2018. Assume further that at the beginning of 2013, the fair market value of the machine is greater than the remaining $500 undepreciated basis ($1,000 − $500 depreciation = $500). Average business/investment use during the first recovery period was 50%. For each year in the second recovery period that business/investment use exceeds this percentage, the taxpayer may claim an additional depreciation deduction. The depreciation deductions in the second recovery period are computed as follows: Year Calculation Deduction 2013 $500 × 20% × 10% $10.00 2014 00.00 2015 $500 × 19.20% × 10% 9.20 2016 $500 × 11.52% × 20% 11.52 2017 $500 × 5.76% × 10% 2.88 2018 00.00 Total $33.60 This cycle would be repeated beginning in 2019 because the taxpayer has not recovered the total cost ($1,000) of the property. If the fair market value of the property in the beginning of 2019 is less than the undepreciated basis ($1,000 − $500 − 33.60 = $466.40), then the recovery percentages are applied against the fair market value. See also Example (2) in ACRS Prop. Reg. § 1.168-2(j)(7). Quote Link to comment Share on other sites More sharing options...
Dan Posted February 10, 2015 Author Report Share Posted February 10, 2015 Thanks Danrvan for the information. I really appreciate it. Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted February 10, 2015 Report Share Posted February 10, 2015 Year Calculation Deduction 2013 $500 × 20% × 10% $10.00 2014 00.00 2015 $500 × 19.20% × 10% 9.20 2016 $500 × 11.52% × 20% 11.52 2017 $500 × 5.76% × 10% 2.88 2018 00.00 Total $33.60 This cycle would be repeated beginning in 2019 because the taxpayer has not recovered the total cost ($1,000) of the property. If the fair market value of the property in the beginning of 2019 is less than the undepreciated basis ($1,000 − $500 − 33.60 = $466.40), then the recovery percentages are applied against the fair market value. See also Example (2) in ACRS Prop. Reg. § 1.168-2(j)(7). That's nuts! 1 Quote Link to comment Share on other sites More sharing options...
Max W Posted February 10, 2015 Report Share Posted February 10, 2015 S/L 5 yr depreciation is 10% the first year and 10% the last year, which means it take 6 years. 08 -$4000 09 - $8000 10 $8000 11 $8000 12 $8000 13 $4000 Total - $40,000 Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.