Can I take advantage of Section 179 by purchasing something in one year, selling it the next year while buying a new thing the next year, and repeat each year? So for example, • buy property for business in 2018, get Section 179 deduction for 2018 property • sell 2018 property in 2019, buy new property in 2019, get Section 179 deduction for 2019 property • sell 2019 property in 2020, buy new property in 2020, get Section 179 deduction for 2020 property • etc Is there an advantage in doing that, if allowed?

@Joe Pea There are very specific rules relating to S179 of property leased out to customers by non-corporate taxpayers. I'd encourage you to reach out to your CPA post April 15th for the details and an in-depth explanation. While it would be advantageous for tax to do what you're describing (assuming it's permissible under Sec 179), it's most likely poor business sense. Your cash flow and ROI will suffer. If it's such a good idea you have to ask yourself why the big boys -- Hertz, Enterprise, Alamo, U-Haul, etc -- haven't been doing it for decades.

Gain = proceeds - tax basis Loans do not factor into the equation. There are special rules surrounding S179 and vehicles (called "listed property").

You have to recapture the depreciation when you sell it. It’s called section 1245 depreciation recapture. And these depreciation recapture is taxed at ordinary rate. So selling it next year after taking 179 does no good. You will have saved nothing as you have to recapture full amount of section 179 deduction next year to the extent of your gain. Your entire sale proceeds gain because you don’t have any basis as you took section 179 deduction.

What I am doing with the vehicles is using them as rentals (renting them out to people on getaround.com, turo.com, etc, and do the work like cleaning the cars, handing renters the keys, checkin, checkout, etc). If I'm using them that way (for actual business), and then selling the next year, is it different?

My understanding is he's talking about personal property used in a trade or business guys. Not real property held for sale in the ordinary course of a trade or business...

Most of us flippers are considered dealers. So that won’t work. From what I read investment property doesn’t qualify for a 179 deduction. Property bought for a business or trade purpose can. But if you dip it every year you are begging for an audit and I’d bet they would rule you weren’t using the property for a trade If you use 179 deductions for vehicles, make sure you keep very detailed logs. You WILL get audited eventually.

No, if you are flipping, buying is inventory. You don’t expense it until you sell it. Also loans have nothing to do with a taxable gain. A gain is sell price less selling fees less your basis. The gain is basically the same whether there is a loan on it or not.

But there's also the loan for the item. I have a car finance for example. So if I sell it, and that money goes straight to paying the finance (plus I pay any small amount that might be left, what happens? Do I still have to report the sale price entirely as income even though it went straight to the loan payoff?

@Joe Pea You realize the proceeds will be taxable income right? Ordinary income potentially subject to SE taxes for an asset used in a trade or business. And it's very unlikely you're going to get back when you paid for the asset when you're selling it with one year's use on it.

Followed Discussions Followed Categories Followed People Followed Locations

Tax, SDIRAs & Cost Segregation

Market News & Data

Market Trends & Data

Buying & Selling Real Estate

Out of State Investing

Real Estate News & Current Events

Real Estate Technology

Investor Mindset

General Info

BiggerPockets Exclusive PRO Area

PRO

General Real Estate Investing

BPCON

New Member Introductions

Questions About BiggerPockets & Official Site Announcements

Off Topic

Starting Out

Real Estate Success Stories

Real Estate Horror Stories

Real Estate Strategies

House Hacking

Commercial Real Estate Investing

BRRRR - Buy, Rehab, Rent, Refinance, Repeat

Innovative Strategies

Mobile Home Park Investing

Multi-Family and Apartment Investing

Land & New Construction

Wholesaling

Rehabbing & House Flipping

Short-Term & Vacation Rental Discussions presented by

Tax Liens & Mortgage Notes

Medium-Term Rentals

Buying & Selling Small Businesses

Outdoor Hospitality

Landlording & Rental Properties

General Landlording & Rental Properties

Managing Your Property

Marketing Your Property

Tenant Screening

First-Time Home Buyer

Real Estate Professionals

Mortgage Brokers & Lenders

Contractors

Real Estate Agent

Financial, Tax, & Legal

Personal Finance

Creative Real Estate Financing presented by

Insurance

Private Lending & Conventional Mortgage Advice

Tax, SDIRAs & Cost Segregation presented by

Foreclosures

1031 Exchanges presented by

Goals, Business Plans & Entities

Legal & Legislation

Real Estate Classifieds

Classifieds

Real Estate Events & Meetups

Reviews & Feedback

Ask About A Real Estate Company

Real Estate Deal Analysis & Advice

Guru, Book, & Course Reviews

Syndications & Passive Real Estate Investing

Updated about 6 years ago on 04/16/2019. Most recent reply presented by

13
Posts: 0
Votes

Joe PeaPoster

Tax, SDIRAs & Cost Segregation

Section 179: buy items one year, sell them the next year, repeat?

Joe PeaPoster

Posted April 14, 2019 17:11

Can I take advantage of Section 179 by purchasing something in one year, selling it the next year while buying a new thing the next year, and repeat each year?

So for example,

buy property for business in 2018, get Section 179 deduction for 2018 property
sell 2018 property in 2019, buy new property in 2019, get Section 179 deduction for 2019 property
sell 2019 property in 2020, buy new property in 2020, get Section 179 deduction for 2020 property
etc

Is there an advantage in doing that, if allowed?

0 Votes

9 Replies

Jump to Last Reply

Section 179: buy items one year, sell them the next year, repeat?

Most Popular Reply