Adjust Your Tax Position to Generate Cash Flow Now
24 Construction Equipment Distribution www.cedmag.com October 2009 Money In these hard economic times it is important that dealers are fully aware of the effects of the tax law on their business. It is incumbent on the business owner to take full advantage of any opportunities the tax system may leverage for their business. Let's take a look at some opportunities that have been recently enacted into legis-lation and some pitfalls for the unwary if proper planning is not undertaken. Special Depreciation Option For property placed in service after Dec. 31, 2007, and extended to property placed in service after Dec. 31, 2008, in tax years ending after that date, an additional deprecia-tion deduction is available, equal to 50 percent of the adjusted basis of qualified property. The property generally must be acquired before Jan. 1, 2010, and must be placed in service before Jan. 1, 2010. Qualified property includes most types of new property other than buildings. There is no alternative minimum tax ( AMT ) depreciation adjustment for qualified property that provides for the addi-tional 50 percent first-year deprecia-tion allowance. This means there is no AMT adjustment for the entire recovery period of qualified property. If Code Section 179 expensing is claimed on qualified prop-erty (detailed below), the amount expensed comes off the top before the additional 50 percent first-year depreciation allowance is computed. The full 50 percent additional depreciation allowance is available for qualified property, whether or not the half-year or midquarter depreciation convention applies in the placed-service year, and may be claimed even if the property is placed in service on the last day of the taxpayer's tax year. The 50 percent additional first-year depreciation allowance applies to qualified property unless the taxpayer elects out. The election out may be made for any class of property for any tax year and if made, applies to all property in that class that has been placed in service during that tax year. There must be a definitive of bonus election out depreciation or the bonus applies. According to the Internal Revenue Service, simply not taking the bonus By Steve PIerSon Adjust Your to Generate Cash Flow Now Let careful planning and understanding of your options be your guide. Tax P osit i on