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THE $11 MILLION PLACED-IN-SERVICE DATE

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ONE TAXPAYER’S VIEW OF WHEN HIS PLANE WAS PLACED IN SERVICE DIFFERED FROM THE IRS’S, AFFECTING WHEN HE COULD TAKE A LARGE BONUS DEPRECIATION DEDUCTION

Below is an expert from Daniel Rowe’s article featured in the February 27, 2014 AICPA’s Corporate Taxation Insider newsletter:

airplane-2When it comes to applying tax law, the devil is often in the details. One area in particular where this holds true is the increasingly complex and multifaceted rules of depreciation. Over the past 10 years, special depreciation allowances have grown to include, among others, bonus depreciation (in general and for specific geographic zones), qualified leasehold improvements, qualified retail improvements, and qualified restaurant property. In addition, the phaseout rules and effective dates for depreciation have been modified or extended so many times that it is difficult for the general practitioner, let alone the ordinary taxpayer, to keep up with them.

Misapplying the depreciation rules can be a costly mistake once discovered. Details, such as whether an asset is placed in service on one day or the next, for example, May 5 or May 6, can affect the allowable depreciation deduction. Likewise, details such as a property’s specifically assigned function can affect its tax treatment. In the recent case of Michael Brown (Brown, T.C. Memo. 2013-275), in attempting to satisfy one detail, the taxpayer missed the bigger picture.

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