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Tax Deduction Confusion

Discussion in 'Gen 2 Prius Main Forum' started by pkjohna, Dec 21, 2004.

  1. pkjohna

    pkjohna Member

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    Do we have any tax accountants in the crowd?

    If I trade my 2004 in for a 2005 (with the options I wanted in the first place but didn't want to wait for) how does that affect the tax situation; is it advantageous to defer delivery until 2005 or can I just take the 2004 deduction for the 2005 model if by miracle it were delivered in 2004 ? For that matter what if someone sold his/her 2004? Is there a ruling on how long you must retain possession of the car in order to claim the deduction?

    Common sense would indicate that I can't double dip and claim deductions for both cars but which one should I claim the deduction for?
     
    #1 pkjohna, Dec 21, 2004
  2. DanMan32

    DanMan32 Senior Member

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    From what I understand of the tax code, you purchased the 2004 for your own personal use, and were the original owner and so qualify for the deduction. Same for the 2005. It doesn't matter on the model year, but when you purchase it or put it in service.
    Tax code doesn't specify retention time, or how many deductions you can make.
    However, this does not mean the IRS won't fight you if they audit you. To put less risk of an audit, I would take delivery of the 2005 in 2005 if possible. After all, some people do trade in their cars yearly.
     
    #2 DanMan32, Dec 21, 2004
  3. tag

    tag Senior Member

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    Basically, I agree with DanMan.

    However, it is clearly stated that the property must be acquired for personal use and not for resale. Thus, if you dump your 04 within a very short period of time after purchase and buy an 05 (in the same tax year), they could argue the 04 was acquired for resale and disallow the deduction. You, of course, would argue otherwise but, if your typical level one IRS idiot makes that decision in an audit, you either have to live with it or go through the appeal process. :pukeleft:

    Therefore, I think it would be prudent, if at all possible, to spread the purchases over two tax years.
     
    #3 tag, Dec 21, 2004
  4. SynergyGuy

    SynergyGuy New Member

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    Along those lines, what kind of paperwork will be needed when filling the tax return with regards to this discount? When I purchased the car I wasn't given any extra documentation stating that I bought a hybrid or environmentaly friendly vehicle.
    And yes pkjohna, I agree with the crowd and wait until next year in order to avoid a hassle just b/c the last goverment organization you want to have issues with is the IRS.
     
    #4 SynergyGuy, Dec 21, 2004
  5. tag

    tag Senior Member

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    I just plan to keep a copy of my sales invoice with my return and return-related docs.

    AFAIK, all you need is some sort of documentation indicating you bought a new Prius.
     
    #5 tag, Dec 21, 2004
  6. bentdvr

    bentdvr New Member

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    You will need a Toyota Certification Letter and an IRS Acknowledgement Letter. Both can be downloaded from: http://www.toyota.com/prius/
     
    #6 bentdvr, Dec 21, 2004
  7. DanMan32

    DanMan32 Senior Member

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    Yup, that was my thought pattern. Making the deductions over two years may keep you under the audit radar.
     
    #7 DanMan32, Dec 21, 2004
  8. wildplaces

    wildplaces Junior Member

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    #8 wildplaces, Dec 23, 2004
  9. richard schumacher

    richard schumacher shortbus driver

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    Why not ask the IRS, or read their relevant document? You might save a lot of bother versus relying the well-intended opinions of amateurs.
     
    #9 richard schumacher, Dec 23, 2004
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