COVID and depreciation

Forum|Forum|4 years ago
September 28, 2021
1 reply
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Anyone have any information or even thought about IRS disallowing (continued) depreciation expense on a business asset(s) if those asset(s) were not "in service" due to a partial or complete pandemic related shutdown?

Lacerte Tax

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Best answer by TaxGuyBill

Yes as to the "service" definition, however I see no reference to "idle" time under IRC 167.

If it wasn't taken "out" of service (such as a disposition or conversion to personal use), it is still "in" service.

I don't know where the 'official' information about idle property is, but the easy-to-read version is Publication 946:

Idle Property

Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle (not in use). For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine.

https://www.irs.gov/publications/p946#en_US_2020_publink1000107334

T

TaxGuyBill

Level 15

Can you expand on the situation?

"In service" means ready-and-available to be used for the intended business purpose. Assets that are temporarily idle due to some circumstances can continue to be depreciated. So the details, reasons, and length of being idle may affect the situation.

1

11BusterAuthor

Level 5

As mentioned, if a business is idle and either shutdown partially or closed completely due to COVID in this case, some or all of the business assets are probably not in use due to little/no business activity/purpose. Would they still be allowed to be depreciated?

sjrcpa

Level 15

Do they meet the in service definition provided by Bill?

The more I know the more I don’t know.

Idle Property

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