How do I record the purchase and sale of a business vehicle in service for less than a year?
An owner-manager of a multi-member LLC purchased a 12-passenger company van in January 2019, originally planning to use it for more than one year, so it was recorded as a fixed asset and depreciated using the straight-line method over 5 years. However, the van was sold in November of the same year. During tax filing, it was discovered that assets placed in service and sold within the same year cannot be depreciated, causing an accounting dilemma. Based on the original consultation, this article explores the correct accounting classification and tax implications.
Hi, I am the owner/manager of a multi-member LLC. On 1/30/2019, I bought a company van (12 pax) for $5,775, which I placed into service on 2/1/2019. Because the vehicle was supposed to be used for more than a year, I classified it as a fixed asset "vehicle", then I depreciated the van using straight line methodology over 5 years. However, I ended up needing to sell the van in November. I thought that I would be able to just zero the accumulated depreciation, and net the gain/loss under the income/expense account. Easy peasy. Everything looked good until I went to file my taxes, and learned that I can’t depreciate an asset that was placed in service and sold within the same year. Hence the dilemma... Currently, I have it expensed under an account I’ve created called “Vehicles (Service life <1 year)”, but I still feel it should be capitalized under a current, non depreciable asset of some sort. Does anyone have any expertise they would be willing to lend? Here are the summarized numbers: Purchase cost of vehicle on 1/30/2019: $5,775 Sale of vehicle on 11/12/2019: $8,000 Thank you in advance, Matt