Depreciation Bonus

Depreciation Bonus

February 02, 2005 | By Keith Martin in Washington, DC

DEPRECIATION BONUS issues continue to receive attention.

Companies that invest in new equipment in the US during a “window period” that runs from September 11, 2001 through the end of 2004 or 2005, depending on the equipment, receive a “depreciation bonus,” or the right to write off as much as 50% of the cost of the equipment immediately. The equipment must be new.

The IRS told an air charter company that bought an airplane that had seen some use that it could treat the plane as new. The manufacturer had used the aircraft as a demonstrator and also to fly company executives around on business. It also loaned out the aircraft twice for periods of less than a month each time to customers who were awaiting delivery of their own planes. The IRS told the charter company in a private letter ruling made public in January that it could treat the plane as new. 

The key was that the manufacturer continued to hold the plane out for sale while it was using it for other  purposes. The ruling is PLR 200502004.