At-risk rules for property with business and personal use.

Anybody know what pub discusses at-risk rules for depreciation deductions for property that is being used for both business and personal use?

Reply to
SD
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snipped-for-privacy@gmail.com (SD) posted:

Almost _anything_ regarding individual returns can be found in Pub 17, which after a brief discussion, points you to the right publication if you need the "full Monty" -- which is, in this case, Pub 925.

Bill

Reply to
Bill

Let me be a little more specific. If you are using a home office, you can only deduct depreciation up to the amount of income. The excess can be carried forward. Now what about the general situation when you are depreciating property that is also used for personal use (such as a car, a computer, ...). Also what happens when the depreciation exceeds at-risk? Can you carry it forward to some future date when it no longer exceeds your at-risk and then use it as a deduction? This has to be somewhere in the pubs, but I can't find it.

Reply to
SD

If you don't own the property, you can't depreciate it. How does at- risk come into play? Did you buy it with a non-recourse loan?

You can depreciate assets at the percentage they are business use-- special rules come into play if they fall below 50% business use.

Reply to
Brew1

In partial answer to my own question, if a sole proprietor does not have an LLC in place then everything is at-risk and the at-risk part of the question disappears.

Reply to
SD

You own the house, the car, the computer, the fax machine (if I remember correctly fax machines are non-listed property). These items are converted to partial business use. You are at-risk with the business you are running. (It would be nice if you can argue that you are at-risk with the converted property, but I doubt that the IRS would buy that).

Reply to
SD

How could depreciation exceed amount at risk? If you buy a printer for $500 and use it 100% for business, the most you can depreciate is $500. If it's used 25% for business, the most you can depreciate is

25% of $500 or $125, and that's typically over 5 years.
Reply to
removeps-groups

Use somebody else's money, in a non-recourse loan (so that the lender has no recourse to your outside-of-that-business assets or earnings to repay the loan).

Seth

Reply to
Seth

What if you set up an LLC and use a home office, and use your car for business. I would think that those items are not at-risk, but still depreciable?

Reply to
SD

They're at risk: you paid cash (or got a loan that can claim against anything you own and your future earnings) for them, right? So the full value is at risk.

If I provided you with a computer under terms like "it costs $2,000, which you will pay back with 15% interest, but only from the profits of your business" then you aren't at risk for the cost of the computer.

Seth

Reply to
Seth

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