True or False? Pay now, wait to 2006 to

I think the documentation from the dealer of the transfer date would have to show 1/1/06 or after...they should accommodate you there if they have your money...but you shouldn't need to pay in full, offer them $5000 or something.

rpm

 

I don't know if anyone's tried doing that but it should okay. The deduction (credit) is taken in the year the vehicle is "put into use", "placed in service", "originally used".....whatever. The problem is how does one go about showing the vehicle wasn't "used" until on or after January 1, 2006 when the only documentation available (in the event you-know-who asks) is an invoice dated sometime in 2005?

 

Yeah, I would think so. Regardless, you'll want to have something of substance to document the fact that the vehicle wasn't "originally used" in the year 2005.

 

You'd be well advised to get the advice of a tax professional before implementing this plan.

 

Yes.......language used in the Code and Regs.

 

Energy_Policy_Act_of_2005

 

Page 1392: "placed in service by the taxpayer during the taxable year"

Page 1418: "sold for use in the U.S. after December 31, 2005, is at least 60,000"

Page 1426: "Effective Date.--The amendments made by this section shall apply to property placed in service after December 31, 2005, in taxable years ending after such date."

Looks like "placed in service" is the key term. Maybe you could hold off registration until 2006?

 

This technicality has been raised in other forums. Buying it in '05, that is, paying for it and having the dealer record the transaction, kills the '06 credit. Once it's put in service via having a title created for it, it's in service even if it's sitting on the back lot under a tree. So saith a tax accountant (so he/she claims).

Unless your dealer is willing to play along, and has a more creative tax accountant. But it would require sitting on the DMV transaction until 1/2/06.

 

Here's how the IRS generally defines that term:

“You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity or a personal activity.â€

 

Well, he/she can saith anything and will generally err on the side of caution.

This scenario is atypical; normally, the taxpayer is arguing that the property was placed in service on the earlier date in order to take depreciation, investment tax credit, and other deductions while the Commissioner argues the property was placed in service at a later date.

 

Tag has provided the magic definition, I believe:

Here's how the IRS generally defines that term:

“You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity or a personal activity.â€

My experience is that the IRS is very good at interpretations that result in higher tax liability for us proletariat. A GOOD tax consultant would be a GOOD investment, IMO.

 

What are you hoping to accomplish by paying the dealer early? If you trust him enough to hold the paperwork till 06, isn't he trustworthy enough to hold the car a few weeks for you?