Discussion:Lease Car "Capitalized Cost Reduction"
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Discussion Forum Index --> Tax Questions --> Lease Car "Capitalized Cost Reduction"
| 21 June 2007 | |
| Hello: How do you treat the payment made for the "Capitalized Cost Reduction" shown on the Lease document? Is it treated as an expense in the year the payment is made? | |
Death&Taxes (talk|edits) said: | 21 June 2007 |
| Amortized/Depreciated over the lease? I am curious also. | |
Michaelstar (talk|edits) said: | 21 June 2007 |
| It is amortized s/l over the term of the lease. | |
| 21 June 2007 | |
| Good to know. When I take the FMV for Lease Inclusion purposes, I have been taking the Gross Capitalized Cost, i.e. not net of this. Does that make sense? | |
Death&Taxes (talk|edits) said: | 21 June 2007 |
| I'd been amortizing this simply from common sense but never understood why. | |
Michaelstar (talk|edits) said: | 21 June 2007 |
| When you use the table for the lease inclusion you use the FMV of the vehicle including sales tax as your starting point. Then go to the table which changes every year via a rev proc to determine the lease inclusion amount. Also s/l this amount in the first year by # of months/12.
Utilize that same starting point when valuing the PUCC (personal use company car) for the owner to be included in wages/GP's. | |
| 21 June 2007 | |
| FOr FMV, I have been using the Gross Capitalized cost. Then I use the updated tables for lease inclusion (in this case it is Year 1). Then SL the Lease Inclusion and the CCR (Cap Cost Reduction).
Now to the next point...would it not be easier since the Car is in the SH name to prepare an expense report and submit that for the amount of business use? In this situation (as in most I might add) SH owns the car and the company is paying 100%. I know there are a million threads on this. | |
Michaelstar (talk|edits) said: | 22 June 2007 |
| I would also use the Gross Capitalized cost included on the auto lease paperwork. While that does not include the sales tax, I believe your safe in using that.
I am not sure it would be easier as the s/h would still need to maintain the same records to substantiate the business use. Including the personal % / use in wages is only a once a year deal. They really only end up out of pocket for the actual income taxes which I figure is less than the cash out of pocket for all expenses incurred for the personal use. You can also set up this computation on a fiscal year basis - say November to give you that month to complete the paperwork and have it included in wages by year end. | |
