Bonus Depreciation Recapture

Technical topics regarding tax preparation.
#1
OR_Tax  
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If a taxpayer takes 100% bonus depreciation in year 1 on a heavy SUV, does the bonus have to be recaptured in year 2 if business use falls below 50%? My understanding is that section 168(k) is not subject to recapture, but I have seen commentary to the contrary that indicates bonus taken on listed property is subject to recapture.
 

#2
WEISSEA  
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Yes any excess depreciation(bonus) over straight line(ADS) on listed property (SUV) must be recapturesd in the year business use falls below 50%. IRC 280F(b)(2). To be eligible qualified property for bonus deprecaiton, property cannot be subject to ADS which listed property used 50% or less for business is. See IRC 168(k)(2)(D)(i)(II)
 

#3
OR_Tax  
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Thanks!
 

#4
JR1  
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On a similar vein, I'm trying to understand if there's an inherent advantage in taking 179 or bonus? Obviously, 179 has income limits, but otherwise....does it matter?
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#5
sjrcpa  
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Sometimes it matters for states. Some have lower 179 limits than federal. Some allow bonus and some don't.
 

#6
WEISSEA  
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On a similar vein, I'm trying to understand if there's an inherent advantage in taking 179 or bonus? Obviously, 179 has income limits, but otherwise....does it matter?


1. Neither bonus depreciation nor Section 179 requires an alternative minimum tax adjustment.
2. Both apply to new or used assets
3. Bonus depreciation must be claimed or elected out of by class. Section 179 is elected on an asset by asset basis and can be used to expense less than the full amount of the asset’s basis.
4. Bonus depreciation is not limited by taxable income and can be used to create an NOL and perhaps used immediately.
5. The asset must be used over 50% of the time for business to qualify for Section 179. If the usage later falls below 50% business usage the Section 179 must be recaptured. Except in the case of listed property the 50% business usage is not a requirement for bonus depreciation.
6. State difference, e.g. CA does not conform to bonus depreciation and limits 179 to $25,000
 

#7
Coddington  
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Good list, WEISSEA. With the new 80% NOL limitation, a section 179 carryover can be preferable.
-Brian

Director of Tax Accounting Methods & Credits
SourceAdvisors.com

Opinions my own.
 

#8
JR1  
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Outstanding. You should do seminars!
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 


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