Re: Last minute tax planning

Brent D. Gardner, ChFC wrote:

>   A whole lot of my business owners have bought SUVs this year that qualify
> for the 6,000 GVW requirement. CPAs have been touting this one all year, as
> well as local car dealers.

There are a number of key caveats that are often slighted 
when discussing this matter that I point out to clients.

First, there are rather strict documentation requirements 
for the vehicle found at IRC Section 274(d).  While the 
6,000 pounds gets you out of the depreciation limitation, it 
does *not* remove the vehicle from the "listed property" 
classification.  So there must be adequate contemporaneous 
documentation of the business use.  Now just what is that? 
Well, while Congress indicated back when it was passed that 
it doesn't *have* to be a log book, there's no real 
indication of exact what will qualify short of that <grin>.

Second, if the business use is less than 50%, then Section 
179 is not available and you must take straight line 
depreciation on the business portion.  If business use 
originally is above 50% but then drops below that level, the 
taxpayer must "recapture" that excess in the year in which 
the use drops below 50% and then recalculate on the straight 
line basis.

Third, if the owner is a corporation and the vehicle is now 
used by an officer that is an owner/employee, you may be 
able to treat all use as business *BUT* then the personal 
portion would need to be treated as compensation *AND* be 
justifiable as the same.

Fourth, commuting to your office or a regular business 
location to/from your home is generally *not* business 
use--and the definition of just what is commuting may be far 
broader than most clients are aware.  Now, if you qualify an 
office in the home under Section 280A that problem goes 
away, but that's another set of problems and issues.

--
Ed Zollars, CPA
Phoenix, Arizona