Can someone help with an often asked question of late?

[Andrea - AZFleetSales]

Hi everyone! More than a few of my small biz accounts have asked a question. Although I never give tax advice, I like to state what I believe is the answer and tell them to ask their accountant/cpa. Because vehicle inventory is so low right now and production quite slow, clients have asked if they order a truck that qualified for accelerated 1st year depreciation, if they can still write it off this year if it doesn't arrive before Dec 31. Most will finance with a certain amount down. Most wouldn't even mind having the biz place a full deposit of all costs, and then get a refund when the vehicle and financing comes through. Is there a way to take the full depreciation either through the normal course of buyers order now with a few thousand dollar deposit, or some creative way that meets the legal guidelines? I'm selling orders below invoice, so I have quite a few of these that I'm dealing with that were expected to arrive before year end, but may not. Thanks for any suggestions you can give! I'm glad to be here.

 

[StanleyR1]

The short answer is no. Depreciation does not begin until the asset is placed into service. No matter what purchase activity has occurred or how much has been paid in advance, if the vehicle hasn't been delivered to the purchaser, it cannot be depreciated.

 

[Andrea - AZFleetSales]

Thanks Stanley. Yep, that seems to be the concensus. I just wondered if, with all the fallout from covid, chip shortages, transportation issues, if the IRS may allow for good faith when all the small businesses are already suffering so much. And, a work truck is always a tool to make more money, hence by not getting it timely, they are already losing income and profits while they wait. It will be interesting to see what happens in some IRS audits in the future over deductions happening during these strange times. I've got to believe several small businesses may still try to take the deduction. Thanks again for responding!