Q:

Kerry- You have a great Website with lots of good information.  Thank you for sharing your knowledge.  I elected to purchase a SUV in 2004 and will take the 179 deduction.  I have a LLC, but purchased it in my name and use it 95% for business.  I do not really like driving it.  It is OK for me to just give the Vehicle to my wife next year and let her inherit my cost basis which will be zero?  Seems like that would be too good to be true.  Thanks if you answer the question.

A:

Your "too good to be true" analysis is right on the money.

The law is very explicit that any Section 179 deduction has to be recaptured if the business use of the asset falls below 50% during its normal depreciable life, which would be five years in your example.

Your plan would still have some merit if you are just looking to shift some taxes into a future, possibly lower rate, tax year.  You could claim the Sec. 179 on your 2004 1040 and then pick almost that same amount up as income on your 2005 1040 when you convert the SUV to zero percent usage.  Actually, the recapture amount will be less than the full Sec. 179 because you only need to pick up as income the excess of what you claimed on your 2004 1040 over what the normal depreciation deduction would have been without the Sec. 179.

Good luck.  I hope this clears this matter up for you.  Your personal tax advisor should be able to help you decide if claiming the Sec. 179 under these circumstances is a good idea for you and your wife or not.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 12/22/2004 03:18:00 PM Send this post: