Meet taxpayer Arthur E. Boyce.
On a day not too long ago he bought a new truck from Dan Wiebold Ford Inc.
Then he claimed a $28,749 Section 179 deduction for the cost of the vehicle.
“Deduction denied!” ruled the IRS. It claimed that Boyce leased the truck from the dealer.
Boyce took the case to court and lost. “Sorry” said the court, “but no $28,749 deduction for you.”
The point of the story is that you have to be careful. Very careful. You see, there are lots of rules that make leases look like purchases. And make, what looks like a conditional sales agreement, a lease.
Confused? I’m not surprised which is why I urge you to read my new article titled Tax Tips: Section 179 Deduction: When Your Vehicle Lease Is Not a Lease.
Three ways our fact-filled article can help you:
- We’ll explain the court’s thumbs down decision. The court noted that the attributes of a lease and a sale are often the same or similar which sometimes blurs the distinction between them. We’ll list the five factors that persuaded the court that the vehicle was leased. You’ll get all the details when you read the full article.
- You’ll learn why purchase factors are vitally important. Had Mr. Boyce acquired title or equity, he would have qualified for the Section 179 deduction because he would have owned the truck. Boyce would have qualified as the owner of the vehicle if any one of four criteria were met. We’ll tell you what they are when you read the full article.
- We’ll tell you about the special rules for vehicle leases. Tax law has a statutorily blessed provision for qualified motor vehicle operating agreements that contain a terminal rental adjustment clause (TRAC). A TRAC passes on to the lessee the risk (or reward) that the vehicle will be worth less (or more) at the end of the lease term than the parties projected when the lease was entered into. One beauty of the TRAC is its clarity. It makes crystal-clear that you are the lessee and not the owner. We’ll explain this in detail when you read the full article.