§ 280F. Limitation on depreciation for luxury automobiles; limitation where certain property used for personal purposes
(a)
Limitation on amount of depreciation for luxury automobiles
(1)
Depreciation
(A)
Limitation
The amount of the depreciation deduction for any taxable year for any passenger automobile shall not exceed—
(B)
Disallowed deductions allowed for years after recovery period
(i)
In general
Except as provided in clause (ii), the unrecovered basis of any passenger automobile shall be treated as an expense for the 1st taxable year after the recovery period. Any excess of the unrecovered basis over the limitation of clause (ii) shall be treated as an expense in the succeeding taxable year.
(ii)
$1,475 limitation
The amount treated as an expense under clause (i) for any taxable year shall not exceed $1,475.
(iii)
Property must be depreciable
No amount shall be allowable as a deduction by reason of this subparagraph with respect to any property for any taxable year unless a depreciation deduction would be allowable with respect to such property for such taxable year.
(iv)
Amount treated as depreciation deduction
For purposes of this subtitle, any amount allowable as a deduction by reason of this subparagraph shall be treated as a depreciation deduction allowable under section
168.
(C)
Special rule for certain clean-fuel passenger automobiles
(i)
Modified automobiles
In the case of a passenger automobile which is propelled by a fuel which is not a clean-burning fuel and to which is installed qualified clean-fuel vehicle property (as defined in section
179A
(c)(1)(A)) for purposes of permitting such vehicle to be propelled by a clean burning fuel (as defined in section
179A
(e)(1)), subparagraph (A) shall not apply to the cost of the installed qualified clean burning vehicle property.
(ii)
Purpose built passenger vehicles
In the case of a purpose built passenger vehicle (as defined in section
4001
(a)(2)(C)(ii)), each of the annual limitations specified in subparagraphs (A) and (B) shall be tripled.
(2)
Coordination with reductions in amount allowable by reason of personal use, etc.
This subsection shall be applied before—
(B)
the application of any other reduction in the amount of any depreciation deduction allowable under section
168 by reason of any use not qualifying the property for such credit or depreciation deduction.
(b)
Limitation where business use of listed property not greater than 50 percent
(1)
Depreciation
If any listed property is not predominantly used in a qualified business use for any taxable year, the deduction allowed under section
168 with respect to such property for such taxable year and any subsequent taxable year shall be determined under section
168
(g) (relating to alternative depreciation system).
(2)
Recapture
(A)
Where business use percentage does not exceed 50 percent
If—
(i)
property is predominantly used in a qualified business use in a taxable year in which it is placed in service, and
(ii)
such property is not predominantly used in a qualified business use for any subsequent taxable year,
then any excess depreciation shall be included in gross income for the taxable year referred to in clause (ii), and the depreciation deduction for the taxable year referred to in clause (ii) and any subsequent taxable years shall be determined under section
168
(g) (relating to alternative depreciation system).
(B)
Excess depreciation
For purposes of subparagraph (A), the term “excess depreciation” means the excess (if any) of—
(c)
Treatment of leases
(1)
Lessor’s deductions not affected
This section shall not apply to any listed property leased or held for leasing by any person regularly engaged in the business of leasing such property.
(2)
Lessee’s deductions reduced
For purposes of determining the amount allowable as a deduction under this chapter for rentals or other payments under a lease for a period of 30 days or more of listed property, only the allowable percentage of such payments shall be taken into account.
(3)
Allowable percentage
For purposes of paragraph (2), the allowable percentage shall be determined under tables prescribed by the Secretary. Such tables shall be prescribed so that the reduction in the deduction under paragraph (2) is substantially equivalent to the applicable restrictions contained in subsections (a) and (b).
(d)
Definitions and special rules
For purposes of this section—
(2)
Subsequent depreciation deductions reduced for deductions allocable to personal use
Solely for purposes of determining the amount of the depreciation deduction for subsequent taxable years, if less than 100 percent of the use of any listed property during any taxable year is use in a trade or business (including the holding for the production of income), all of the use of such property during such taxable year shall be treated as use so described.
(3)
Deductions of employee
(A)
In general
Any employee use of listed property shall not be treated as use in a trade or business for purposes of determining the amount of any depreciation deduction allowable to the employee (or the amount of any deduction allowable to the employee for rentals or other payments under a lease of listed property) unless such use is for the convenience of the employer and required as a condition of employment.
(4)
Listed property
(A)
In general
Except as provided in subparagraph (B), the term “listed property” means—
(B)
Exception for certain computers
The term “listed property” shall not include any computer or peripheral equipment (as so defined) used exclusively at a regular business establishment and owned or leased by the person operating such establishment. For purposes of the preceding sentence, any portion of a dwelling unit shall be treated as a regular business establishment if (and only if) the requirements of section
280A
(c)(1) are met with respect to such portion.
(C)
Exception for property used in business of transporting persons or property
Except to the extent provided in regulations, clause (ii) of subparagraph (A) shall not apply to any property substantially all of the use of which is in a trade or business of providing to unrelated persons services consisting of the transportation of persons or property for compensation or hire.
(5)
Passenger automobile
(A)
In general
Except as provided in subparagraph (B), the term “passenger automobile” means any 4-wheeled vehicle—
In the case of a truck or van, clause (ii) shall be applied by substituting “gross vehicle weight” for “unloaded gross vehicle weight”.
(B)
Exception for certain vehicles
The term “passenger automobile” shall not include—
(i)
any ambulance, hearse, or combination ambulance-hearse used by the taxpayer directly in a trade or business,
(6)
Business use percentage
(A)
In general
The term “business use percentage” means the percentage of the use of any listed property during any taxable year which is a qualified business use.
(B)
Qualified business use
Except as provided in subparagraph (C), the term “qualified business use” means any use in a trade or business of the taxpayer.
(C)
Exception for certain use by 5-percent owners and related persons
(D)
Definitions
For purposes of this paragraph—
(i)
5-percent owner
The term “5-percent owner” means any person who is a 5-percent owner with respect to the taxpayer (as defined in section
416
(i)(1)(B)(i)).
(7)
Automobile price inflation adjustment
(A)
In general
In the case of any passenger automobile placed in service after 1988, subsection (a) shall be applied by increasing each dollar amount contained in such subsection by the automobile price inflation adjustment for the calendar year in which such automobile is placed in service. Any increase under the preceding sentence shall be rounded to the nearest multiple of $100 (or if the increase is a multiple of $50, such increase shall be increased to the next higher multiple of $100).
(8)
Unrecovered basis
For purposes of subsection (a)(2), the term “unrecovered basis” means the adjusted basis of the passenger automobile determined after the application of subsection (a) and as if all use during the recovery period were use in a trade or business (including the holding of property for the production of income).
(9)
All taxpayers holding interests in passenger automobile treated as 1 taxpayer
All taxpayers holding interests in any passenger automobile shall be treated as 1 taxpayer for purposes of applying subsection (a) to such automobile, and the limitations of subsection (a) shall be allocated among such taxpayers in proportion to their interests in such automobile.
(10)
Special rule for property acquired in nonrecognition transactions
For purposes of subsection (a)(2) any property acquired in a nonrecognition transaction shall be treated as a single property originally placed in service in the taxable year in which it was placed in service after being so acquired.
(e)
Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations with respect to items properly included in, or excluded from, the adjusted basis of any listed property.
[1] So in original. The quotation marks probably should not appear.