New or tainted asset

Client buys auto with loan in own name in 2013 when sales person for corporate employer. Files Schedule A 2106 using std mileage rate years 2013-15.

Client leaves employer and starts own S corp. No auto usage 2016-17. Clients S corp now in 2018 pays off auto loan and title is transfered to S corp. Small client annual personal miles to be added to clients W-2 using ALV method(Fringe benefit).

Is this a new "used asset" for the S corp, that is can it be 2018 bonus depreciated or 179 on 1120-S? Does the std vs actuals 1st year restart in 2018?

I've not yet had this issue come up in my practice but I have wondered about it. I'm guessing there's a related party rule somewhere leaving the asset tainted but I will be curious to see more experienced practitioners perspectives.

Nope. See 179(d)(2) and 168(k)(2)(E)(ii).

I was just going to post this, then I saw Nilodop's post, with which I agree. I’ve gone over the rules for bonus depreciation and 179 for 2018, and I don’t think that either can be used here.

With respect to bonus depreciation, as amended by the TJCA, either the original use of the asset must begin with the taxpayer (168(k)(2)(A)(ii)), which is the S corp., or the property must meet the 179 requirements (168(k)(2)(E)(ii)). Used property doesn’t qualify as “original use.” Reg. 1.168-1(b)(3)(i). Regarding the 179 requirements, one of the requirements is that the property can’t have been acquired from a related party. 179(d)(2)(A).

"Used property doesn’t qualify as “original use.” Reg. 1.168-1(b)(3)(i). "
Agree 179 out as client owns 100% of S corp(related party rule), but on the bonus original use: Reg1.168-1(b)(3) says
If a taxpayer initially acquires new property for personal use and subsequently uses the property in the taxpayer's trade or business or for the taxpayer's production of income, the taxpayer is considered the original user of the property.

Client is original owner of the vehicle. Since the client is a related party to the S corp would the original use transfer to the S corp?

That reg. cite is inaccurate, but I'll come to that later. First, the law:
Section 168(k)

(2) Qualified property For purposes of this subsection—
(A) In general The term “qualified property” means property—
...
(ii) the original use of which begins with the taxpayer or the acquisition of which by the taxpayer meets the requirements of clause (ii) of subparagraph (E),
...
(E) Special rules
...
(ii) Acquisition requirements An acquisition of property meets the requirements of this clause if—
(I) such property was not used by the taxpayer at any time prior to such acquisition, and
(II) the acquisition of such property meets the requirements of paragraphs (2)(A), (2)(B), (2)(C), and (3) of section 179(d).

So we go to the cited parts of 179(d).

(2) Purchase defined For purposes of paragraph (1), the term “purchase” means any acquisition of property, but only if—
(A) the property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under section 267 or 707(b) (but, in applying section 267(b) and (c) for purposes of this section, paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants),
(B) the property is not acquired by one component member of a controlled group from another component member of the same controlled group, and
(C) the basis of the property in the hands of the person acquiring it is not determined—
(i) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or
(ii) under section 1014(a) (relating to property acquired from a decedent).
(3) Cost
For purposes of this section, the cost of property does not include so much of the basis of such property as is determined by reference to the basis of other property held at any time by the person acquiring such property.

So to me at least, the law is pretty clear - no bonus depreciation.

Now to your reg., which I think is reg. 1.168(k)-1(b)(3). Your excerpt is, shall I say, selective. The word "taxpayer" is defined differently than the word "person", as you can see in section 7701(a)(1) and 7701(a)(14). With that fact in mind, here is reg. 1.168(k)-1(b)(3)(ii)(A), with some emphasis by me.

(ii)Conversion to business or income-producing use -

(A)Personal use to business or income-producing use. If a taxpayer initially acquires new property for personal use and subsequently uses the property in the taxpayer's trade or business or for the taxpayer's production of income, the taxpayer is considered the original user of the property. If a person initially acquires new property for personal use and a taxpayer subsequently acquires the property from the person for use in the taxpayer's trade or business or for the taxpayer's production of income, the taxpayer is not considered the original user of the property.

Excellant analysis, the taxpayer being the S corp and the person being the client/owner.

I had come to the conclusion no bonus, no 179 and no 1st year restart because after purchase the auto was initially used by the client as a"sales employee" (with no bonus,179, being taken and std mileage)and being a "sales employee" is a trade or business.