ExpertMedium1 markMultiple Choice
CPA · Question 66 · Area 4: Entity Tax Planning
A sole proprietor buys a luxury SUV (Gross Vehicle Weight Rating > 6,000 lbs) for business use (100%). Cost is $80,000. What is the advantage regarding depreciation compared to a lighter passenger car?
A sole proprietor buys a luxury SUV (Gross Vehicle Weight Rating > 6,000 lbs) for business use (100%). Cost is $80,000. What is the advantage regarding depreciation compared to a lighter passenger car?
Answer options:
A.
No advantage.
B.
Not subject to the strict luxury auto depreciation caps (Section 280F).
C.
Can be expensed 100% under Section 179 without limit.
D.
5-year life instead of 7-year.
How to approach this question
1. Identify Asset: Heavy SUV (>6,000 lbs).<br/>2. Identify Restriction: Section 280F limits depreciation on 'luxury automobiles' (passenger cars < 6,000 lbs).<br/>3. Advantage: Heavy SUVs are exempt from 280F caps, allowing for significantly faster depreciation (Bonus/179).
Full Answer
B.Not subject to the strict luxury auto depreciation caps (Section 280F).✓ Correct
B
SUVs over 6,000 lbs GVWR are exempt from the Section 280F luxury auto limits, allowing for much larger immediate deductions via Section 179 (up to the SUV limit) and Bonus Depreciation.
Common mistakes
Thinking they are subject to the same low caps as sedans.
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