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I am an owner of an LLC. I will take distributions through a…

I am an owner...

I am an owner of an LLC. I will take distributions through a schedule K1 pass through. I also receive W2 income from an employer and 1099 income. Will I be able to fully depreciate a qualifying truck that I purchase in my own name using a section 179 and it offset my taxable income from my W2 and 1099 income? The LLC K1 will probably not have income to report this year in the form of distributions.

Accountant's Assistant: The Accountant will know how to help. Is there anything else the Accountant should be aware of?

I don't believe so.

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11/7/2017
PDtax
PDtax, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 5,033
Experience: 35 years tax experience, including four years at a Big 4 firm.
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Customer reply replied 6 months ago
am an owner of an LLC. I will take distributions through a schedule K1 pass through. I also receive W2 income from an employer and 1099 income. Will I be able to fully depreciate a qualifying truck that I purchase in my own name using a section 179 and it offset my taxable income from my W2 and1099 income? The LLC K1 will probably not have income to report this year in the form of distributions.
Customer reply replied 6 months ago
I didn't actually get an answer in your initial response.

I had to think about your scenario. I can think of a number of ways to make this work, so I'll start by saying it depends.

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Customer reply replied 6 months ago
Can you go into detail on "depends?"

The depreciation rules refer to placing an asset in service in a trade or business. You did neither. You personally pwn a truck. But you could contribute the truck to your LLC and use it as a business asset.

That's where it gets interesting. Since you own an LLC, and likely financed the asset personally, like most LLC owners. It's in your name, and your insurance.

You're stuck unless you place it in service, either but transferring the asset into the LLC our use it yourself in a trade or business.

To avoid the sales tax and insurance issues, I suggest you rent it to your LLC. With a lease, and fair rent. Then you get a deduction for the depreciation that you want.

There are some details to this, but that's not needed here. The lease works, and you have placed your asset in service.

Thanks for asking at just answer. Positive feedback is appreciated. I'm PDtax.

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Customer reply replied 6 months ago
34;You're stuck unless you place it in service, either but transferring the asset into the LLC our use it yourself in a trade or business."If I purchase the asset without leasing or renting to the LLC, but I do use it in myself in the trade or business would I be able to fully depreciate on my personal taxes?
Customer reply replied 6 months ago
Positive feedback will be left. Thank you

I'm going to expand my answer to what I consider a stretch of the asset rules. An LLC is a disregarded entity for IRS reporting purposes. You can elect other entity treatment, but it is typically a schedule c business. As such, you can buy the asset personally and consider it a business asset.

I recommend the lease arrangement as it is more traditional, but you could simply test the truck as an LLC asset. I suggest business insurance, since you are blurring the line between business and personal assets.

Example: accident in truck on the way to a client. Do you get LLC protection? The tax treatment works, but it should have the trappings if a business asset.

Thanks for the positive feedback.

PDtax

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Customer reply replied 6 months ago
I if purchased the truck through the LLC, insured it through the LLC and put it into service, could I then fully depreciate the price of the truck to help reduce my personal taxable income through W2 and my 1099?Thank you

Yes.

PDtax
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