A recent ruling may signal changes for depreciation and 1031 exchanges of leased equipment. Are you prepared?
The IRS is again challenging the status of leased equipment as “dual use” property where it is also available for sale or lease at the same time. Property that is considered to be held for sale is inventory and that classification means that the property cannot be depreciated for income tax purposes and also that it is not eligible to be exchanged in a like-kind exchange.
The IRS recently issued a ruling with these results. This is the loss of two of the most important tax benefits of owning rental property – the ability to take depreciation (cost recovery) deductions and to defer gain recognition from the sale of the property by using a like-kind exchange. I recently discussed this ruling in an article in World Leasing News – take a look and consider whether the new ruling might affect your business.