Q:

Subject: Section 179

 Dear Kerry,

 I wanted to inquire as to your fee to get a determination on the following tax issue:

 

I purchased an SUV for my business in Dec 2002 and took the sec .179, (24k) plus 1st year accelerated depn (approx 7k).

 

Traded it in Sept of 2003. for another that was 7,000 more and reported a like kind exchange

 

Now, Aug 2005, I want to trade it for a station wagon. (non qualifying under sec 179). Value of the trade is about 31,000 and the new car is about 60,000.

 

What are the recapture issues. When will it not matter, etc.

 

Thank you,

A:

While the new station wagon may not qualify for the huge Section 179 deduction that vehicles over 6,000 pounds do, it does qualify as a like kind asset for an exchange from your current SUV. 

Since you are trading up and not receiving any cash out of this transaction, the only way any Section 179 recapture would kick in is if the new vehicle is used less than 50% for business purposes before December 2007 (five years after the original SUV was purchased).  If that happens, a pro-rated recapture would be required.

If that's a possibility, you should work with your personal tax pro to see how much that would cost you in actual tax dollars.

Good luck.

Kerry Kerstetter

 

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 8/07/2005 01:19:00 PM Send this post: