Depreciation Questions

[Joe Failla]

Depreciation Questions:

I purchased a 1989 Dodge Caravan in 1990 for $14,000. It was used solely for pleasure until I closed on a rental property on 1/23/98. From that point on, the mini-van was used mainly for travel to and from the rental property. Business use averages about 75%, while pleasure use is about 25%.

My tax program (Tax Cut) runs through a series of steps and questions to help determine the depreciation of the vehicle. Some of them are obvious and straightforward. However, I am having a problem with the following questions:

· Date placed in service

· The vehicles basis

· Useful life

· Salvage value

I am not sure how to answer these questions. For instance………..

· Is the date placed in service the date I bought the mini-van, or the date I started using it for the rental property?

· Is the vehicle basis what I originally paid for it the day I bought it, or what the vehicle was worth the day we started using it for the rental property?

· For useful life, the program says it could be from 5 to 10 years. How do I know what it is?

· How do I determine salvage value? (Is it what the vehicle is worth as a "junker")?

In addition, how does Section 179 come into play?

What is it? How can I best apply it to items I can claim as deductions for my rental property, such as:
· Dwelling
· Furniture
· Mini-van
· Computer
· Anything else

 

[loku]

1. Is the date placed in service the date I bought the mini-van, or the date I started using it for the rental property?

It is the date you started using it for the rental property.


2· Is the vehicle basis what I originally paid for it the day I bought it, or what the vehicle was worth the day we started using it for the rental property?

It is the original cost.


3· For useful life, the program says it could be from 5 to 10 years. How do I know what it is?

Take 5, it will give you more deduction.


4· How do I determine salvage value? (Is it what the vehicle is worth as a "junker")?

Yes, that is it.

5. In addition, how does Section 179 come into play?

Section 179 allows you to deduct, in the year you incur them, certain costs that you would otherwise have to depreciate over a period of years; however, Section 179 applied to business property, and yours is investment property, so Sec 179 does not apply.