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03-14-2015, 09:00 PM
 Junior Member Join Date: Mar 2015 Posts: 1
Conversion of Listed Property to personal use

I have an S Corporation with a vehicle that was placed in service 5 years ago. It was converted to personal use in early 2014.

But it was only 50% business business over that 5 year period.

Let's say it was purchased for \$40,000, and 179 of \$20,000 was taken.

Now, at conversion, the FMV is \$20,000.

My software is showing \$20,000 of basis (\$40K cost, less \$20K 179), despite the 50% business use clearly reported on the return.

I think my basis should be \$0 (cost of 50% of \$40K = \$20K, less \$20Kk 179).

And my proceeds should be 50% of the \$20K total, and thus I should have a \$10K gain, subject to 179 recapture.

I'll take the steps to manipulate the return to return that result - \$10K of gain, but I wanted to make sure I'm not missing something - do I somehow get the benefit of the personal basis of the vehicle in determining gain? (No way that's right). Thoughts?

03-15-2015, 06:13 PM
 Moderator Join Date: Oct 2010 Posts: 5,233
Quote:
 Originally Posted by jm59 I have an S Corporation with a vehicle that was placed in service 5 years ago. It was converted to personal use in early 2014. But it was only 50% business business over that 5 year period. Let's say it was purchased for \$40,000, and 179 of \$20,000 was taken. Now, at conversion, the FMV is \$20,000. My software is showing \$20,000 of basis (\$40K cost, less \$20K 179), despite the 50% business use clearly reported on the return. I think my basis should be \$0 (cost of 50% of \$40K = \$20K, less \$20Kk 179). And my proceeds should be 50% of the \$20K total, and thus I should have a \$10K gain, subject to 179 recapture. I'll take the steps to manipulate the return to return that result - \$10K of gain, but I wanted to make sure I'm not missing something - do I somehow get the benefit of the personal basis of the vehicle in determining gain? (No way that's right). Thoughts?
My software is showing \$20,000 of basis (\$40K cost, less \$20K 179), despite the 50% business use clearly reported on the return.====>I guess you need to check the depreciation table showing cumulative and current depreciation and your SCh L of 1120S.or you may tech help from the software vendor.

I think my basis should be \$0 (cost of 50% of \$40K = \$20K, less \$20Kk 179).======>>>Then \$8K; you ned to take sec 179first; and then 50% bonus depreciation; \$40K-\$20K(sec 179) and then 50%*\$20K=\$10K;\$20K-\$10K=\$10K.And 20%*\$10K=\$2K, so \$10K-\$2K=\$8K.

And my proceeds should be 50% of the \$20K total, and thus I should have a \$10K gain, subject to 179 recapture.

I'll take the steps to manipulate the return to return that result - \$10K of gain, but I wanted to make sure I'm not missing something - do I somehow get the benefit of the personal basis of the vehicle in determining gain? (No way that's right).==========>>As mentioned above. this is not your case , however, personal use of company car is wages that is subject to federal income tax as well as the other employment taxes.at least you take advantage in applying auto expense deduction method; you may choose the larger of mileage or actual exp.i mean say your S corp is going to reimburse you for the business-vehicle expenses under one of two methods:it can reimburse you at the IRS standard mileage rate, currently 55.5 cents a mile; or it can reimburse you for actual expenses, including depreciation, whichever is larger.or generally, you should personally pay all vehicle expenses on your personally titled cars. Then, have the S corp reimburse you using either the mileage rate or actual expenses (including depreciation and ;section 179 expensing) methods discussed above.the bottom line;as you used your car fro biz purposes, 50%, then when you dispose of it, and there is gain ,sec 1231 gain, ltcg I mean, then you also must recapture sec 1245 gain taxed as ordinary income at 25% aslongas your marginal tax rate is 25% or higher.

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