Changing Business Property to Private Use

Discussion in 'Business Operations' started by Hud, Aug 12, 2003.

  1. Hud

    Hud LawnSite Member
    Messages: 63

    Does anyone here know what paperwork has to be done/money given to the IRS when you convert a piece of business property to private use? I have a truck that's been done with IRS depreciation/179 for 3 years now that rarely gets used. It's value is a whole lot more than I'd get if I tried to sell it so I won't. If I convert it to private use, at least someone will drive it every so often so that it doesn't turn completely to junk. What's the IRS procedure? Thanks!
  2. Green in Idaho

    Green in Idaho LawnSite Senior Member
    from Idaho
    Messages: 833

    Converting (5 year) property to personal use within 5 years of claiming the section 179 subjects you to recapture: the normal dep is compared to the accelerated dep --and you pay on the excess dep that was originally taken.

    Further, since vehicles fall in a special group called "listed property" the recapture rules apply any time the percentage of use for the vehicle falls below 50% for business use within in the regular recovery period. This would have been true in previous years too. And it is true even if you did not elect 179.

    But from reading I take it the truck was bought 8 years ago (5 for dep and 'done for 3years now'). So if it is after the normal dep time period the basis of the property for the biz ought to be zero.

    When you convert to personal property the basis transfers too. So you personally own a vehicle with zero tax basis. Whenever you sell it it will be a fully taxable sale on the full sales price. Unless you used it for biz and personal, then you have to determine your biz basis and the personal basis and figure gain appropriately for each part based on that usage ratio.

    As far as procedures, just document information such as date of 'conversion', odometer, and FM Value.

    If recapture applies, see IRS publication 534 & 946 at and/or your accountant to determine the actual dollar impact.
  3. Hud

    Hud LawnSite Member
    Messages: 63

    Thanks for that excellent explanation. Very much appreciated!

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