Food Truck Depreciation or Monthly lease

[jmillan]

Hi experts! 

We ordered a Food Truck late 2020 and received it in Jan 2021; the food truck business started mid-2021.  The sale cost was $29,000.  We paid $10K as a down payment (3 installments in 2020) and what we were able to quaify  to finance the remaing $19K was a Lease Agreement paying a monthly fee for 40 months.  The Lease agreement allows to  purchae the food truck at the end of the term for $2K.     How should I consider the food truck acquisition, an asset to depreciate or take the monthly fee as a expense deduction? Should I consider the $10K down payment different to the lease payments?

Thanks

[ColeenD3]

No, you just treat the entire amount as a purchase price. Down payments and payment plans are not considered here.

You can begin to depreciate the truck once you place it in service. It is an asset for Schedule C.

[Mike9241]

The IRS rule is that you claim depreciation on leased equipment if your contract is a lease-to-own arrangement. If it’s a not-to-own lease, you deduct the payments as a regular business expense, even if the lease meets GAAP’s five-fold test for a finance lease.

[jmillan]

Thanks all.