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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10164
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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My corporation owns vehicle. Purchase price was $70,000 in

Customer Question

My corporation owns vehicle. Purchase price was $70,000 in 2010. Depreciation taken to date is $15,000, per turbo tax. Blue book value now $30,000.

I want to buy vehicle from my Subchapter S Corporation at $30,000.

Should Corporation write off $25,000 in depreciation in 2013?
Submitted: 3 years ago.
Category: Tax
Expert:  Lane replied 3 years ago.

Customer:

Hi,

Customer:

A couple of things ... the amount that's written on as depreciation for the time that the truck used for business won't change ... You'll just need to adjust for the tme that it's not in service for the tax year.

Customer:

Because an S-corp is a pass-through (just as a partnership, sole proprietorship or LLC) that depreciation was flowing through to you on your 1040 already (as a lowering of taxable profit or adding to a loss, depending on your business for the year)

Customer:

Only C-Crops and Irrevocable trusts actually pay their own taxes (at corporation and trust brackets and rates, respectively)

Customer:

So buying the truck from the corporation does a couple of things ...

Customer:

(1) removes it from the corporation and becomes a personal asset

Customer:

but (2) now, you can only depreciate based on whatever percentage you use it for business

Customer:

I still don't see you coming into the chat, so I'll move us to the "Questions and Answer" ... maybe that will help (We can still continue a dialogue there, just not in real-time as we can here)

Expert:  Lane replied 3 years ago.

If you would, let me know a little more about what your trying to accomplish.

 

For example are there other S-Corp shareholders?... (so that you are buying it from the other shareholders)

 

Maybe we can work through this some more.

 

But if you ARE the only shareholder, then as far as IRS is concerned, you already own the truck, and by removing it from the business, you' re just making it a little harder to prove any business use, hence depreciation.

 

Let me know

 

Lane

 

 

Expert:  Lane replied 3 years ago.

I'm not sure I understand your rating of my answer.

i'd love to have the opportunity to make you a satisfied customer.

This poor rating you've given me affects both my ratings here and my pay.

I was just trying to be both thorough and accurate in the interest of helping you "see around some corners."

Is there anything I can do?

Expert:  Anne replied 3 years ago.
Hi

Different expert here.

If the company truly owns the car, then it must be titled in the company’s name. If this is true, then in the year of sale, your business may clam 1/2 of the allowable depreciation,

I truly hope this information is helpful but please do not rate until you are satisfied. If you want to click on 1 or 2 just click on the continue to work with me button instead. You will then be able to add any other info or respond to what I have posted so far. Rating 3-5 gives me credit and a good rating but you can still converse with me.

Expert:  Lane replied 3 years ago.

Hello David,

... just checking back.

What the expert has added above is correct.

Be sure that you understand that this relates to "allowable" depreciation.

More important, however,are the implications to you as the taxpayer, to any other shareholders, the use of the truck going forward, how this would flow through on your k-1, etc.

Again, if you'd like to work through the scenarios with the end in mind being maximization of financial benefit (of which tax benefit is a part), I'd be glad to help.

And just to be sure you understand the answer to your question, implicit in both expert's answer, the answer is (based on the information you've provided); No.

Again, if you want some real analysis, let me know.

Lane

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