Q-1:
Subject: Sec. 179Dear TaxGuru,My husband and I have two sole proprietorships that is offset by his regular job salary. One is a farm that does not make money, but keeps vets and blacksmiths busy and the other is a new classic car business. We purchased a Ford F350 truck with crew cab that weighs 13000 lbs for the purpose of both businesses.Does this truck qualify for the full purchase price of $47,000 to be written off in one year under the Sec. 179 2005 rules. The truck was modifed to handle a gooseneck horse trailer, but also serves to pull a car trailer for restoration projects.I am thinking that if the full amount can be written off, I should put it under the farm as farms are recognized as not money makers. However, do I have the option of splitting the truck’s cost between the two companies. Expenses are greater that profits for the car business as it takes a long time to restore the cars, find them, etc. The farm could show a very modest profit ($1,000 or so) if I do not use all allowable deductions.What is your suggestions, recognizing that I should consult a tax pro.Thank you.
A-1:
Check out this post from last month.
Any deductions for the truck would have to be allocated to the various business schedules that you are using, based on miles driven.
If you are actually using the same facilities and equipment for both your farming and car operations, you should consult with a tax pro as to the feasibility of combining them on the same business schedule with your 1040. It makes things a lot easier than having to split everything up. That’s what I have been doing here for the past 12 years we have been living on this ranch for pretty much all sorts of different kinds of income (including sales of animals, hay, timber, jewelry and ceramics), except for my CPA work. IRS has never had any problems with that.
Good luck.
Kerry Kerstetter
Q-2:
Kerry,Thank you for your quick response. It sounds as though I should put the truck on the car business where the miles are at this time. This would prevent me from reporting the mileage deduction, so do I need to show business miles in order to support the truck?I wanted to confirm that my Ford F350 Crew Cab with a normal bed that a sheet of 4×8 plywood can fit into qualifies in 2005 for the full deduction of $47K?Thanks again.
A-2:
As you noted earlier, you really need to be working on matters such as this with a tax pro so that you don’t screw things up on your own.
One of the most basic requirements for the Section 179 deduction is that the asset be placed into service before the end of the tax year. For vehicles, this means that it must be driven for business reasons.
You will need to get the specs for the truck you are looking at and compare them with the dimensions as specified in the tax law for qualifying for the larger deduction. In the post that I sent you earlier, the defining point was the length of the truck bed. I researched that specific case because it was for a long-time client who actually paid me for that time. I do not have time to do this for you; especially right now, as we close in on the April 17 crunch date.
I would be very careful of relying on the dealer’s claim that the vehicle meets the specs for Section 179. I have seen dozens of cases where they will say anything the customer wants to hear just to make the sale, and the buyers are left holding the bag later on when they discover that the vehicle in fact didn’t meet the requirements, most often for the 6,000 pound weight threshold; but the bed length is also a key factor. Needless to say, car dealers aren’t exactly known for standing behind their tax opinions when push comes to shove. You would be much safer working with a tax pro who can make reliable determinations.
Good luck. I hope this helps.
Kerry Kerstetter
Tax Guru - Ker$tetter Letter 