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Posted by Arthur Kamlet on January 12, 2008, 5:10 pm
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>I purchased some equipment in 2005 and 2006 that would qualify as
>Unreimbursed Employee Expenses (deductible as miscellaneous deductions
>on Schedule A, via depreciation or Section 179). However, in 2005
>and 2006, even if I expensed the equipment under section 179, I still
>wouldn't have had enough miscellaneous deductions to exceed the 2% of
>AGI floor. So, I didn't file form 4562, and didn't claim any
>miscellaneous deductions in thos eyear.s
>
>Now, in 2007, considering only equipment purchased in 2007, and other
>expenses incurred in 2007 and deductible as Miscellaneous Deductions,
>I have exceeded 2% of AGI and thus will claim those deductions and
>will file form 4562 (and elect a Section 179 deduction) for the
>equipment I purchased in 2007.
>
>So ... what about the equipment purchased in 2005 and 2006.
>
>My best option would be:
> Deduct the 2007 depreciation for the 2005 and 2006 equipment in
>2007. Use 200DB for the 2006 equipment (second year depreciation is
>higher under 200DB than SL for five year equipment, which this is).
>Use SL for the 2005 equipment (third year depreciation is higher under
>SL than under 200DB for five year equipment). Is this allowable?
>
>Specifically, can I claim depreciation in 2007 for equipment placed in
>service for prior years, if I didn't file form 4562 in those years?
>And if so, can I make an election to use SL (Straight Line)
>depreciation, or is such an election only valid if made (and
>documented via form 4562) in the year the equipment is placed in
>service?
>
>The two other choices I have would be:
>
> Deduct the depreciation for the 2005 and 2006 equipment in 2007, but
>use the 200DB method for both. (If it's too late to elect SL)
>
> Don't deduct any depreciation for that equipment (if there's a
>requirement to have filed form 4562 in the year the equipment was
>placed in service).
>
>Note that filing amended returns for 2005 and 2006 (to add a form
>4562, which wouldn't change my tax for those years) isn't an option
>for me. That's more effort than I'm willing to expend for the amount
>of money this will save me.
>
>Also, to be clear, I realize that the depreciation for 2005 and 2006
>is lost . I'm not seeking to claim that in 2007. I'm just wanting to
>claim the 2007 depreciation for that equipment, since, for 2007, I do
>exceed the 2% AGI floor.
>
>Any know what the rules are here? The IRS instructions doesn't really
>address this case, as nearly as I can tell ...
Wow. Lots of stuff an I have to run in a minute.
Yes, you can treat the prior year properties as if they
had been depreciated in prior years. But the best overall way
to do this and recover the most expense is to use staright line.
That's because you used up the heaviest amount the first two years.
And for the 2006 property, HY 200DB gives you the same as S-L so it
would seem not to matter, except....
you must uyse the same acceleration calculation for all property
of the same class - basically all property with the same class life.
So S-L is probably the best choice, even S-L the 2007 property
and then 179 it if you wish. As you know, it's too late to 179
the older property.
The depreciation Pub (936??) should have all these rules.
--
ArtKamlet at a o l dot c o m Columbus OH K2PZH
--
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