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Depreciation question on Luxury autos

In the past our Husband and wife partnership business has been doing fine. We file IRS form 1065 and K-1s. We are filing our 1065 for 2018. We have an extension.

Based on this business doing OK, we purchased a luxury vehicle in Jan 2018 We have 2 other cars that we use for personal use. One car for each of us.

However, in 2018 our business took a dive. According to the IRS the depreciation is $18,000 in the first year for such vehicles including the Bonus depreciation. This is a large figure relative to our 2018 sales. Will this trigger an audit? Will the IRS ask us why did we have to purchase a luxury vehicle?

Thank you

Reply to
Tracy
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Sorry about the excessive quoting, but....

  1. You can opt out of bonus depreciation on a return filed by the extended deadline. (If you took bonus depreciation on the original return, there's a special code section you have to quote at the top of the amended return in order to revoke the election.)
  2. Seems unlikely to trigger an audit, and there is no legal requirement or IRS regulation requiring you to use the cheapest available item, but the IRS _probably_ won't ask you why you purchased a luxury vehicle. They may ask whether you used the vehicle for personal or non-business reasons. If you did, the value of that use, which may exceed the deduction the business would have taken, has to be added back to your personal returns.

-- Arthur L. Rubin, Brea, CA

Reply to
Arthur Rubin

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