Sold a company, opened a company + W2 income. Is section 179 useable in this case?

[djb77]

I'd like to purchase a new vehicle for a new mobile business venture. We just sold our company this year, and just registered another LLC for a new venture. Taxable income for the new company this year will be $0

Our old company (LLC - S corp) will be reporting roughly $400k in taxable income. The sale of the company generated $2.9M which will all be long term capital gains i believe. 

We also have W2 income of about $380k. 

A vehicle for the new company is essential, and being over 6000lbs should qualify for a full year 1 deduction. The new company wont be very big, just something small to keep us occupied rather than a big money maker, so multi year depreciation probably wouldn't be the best. 

 My thinking is to use the large tax burden for this year as it will be our last of anywhere near this magnatude. 

1) Even though the company is technically sold, could i register the vehicle in the old company name? ( thinking here is that the vehicle may need to be in the name of the company getting taxed)

2) If i register in the new company name, if that company earns $0, does that render section 179 unuseable?

3) If #2 applies, does our W2 income count for anything?

 I realize now that i probably should have done this a couple of months ago while we still owned our last company, but this new one was a spur of the moment decision. I have 30 days to pull the trigger so just looking for answers from people in the know to help out as our CPA is out of reach until the new year. 

Thanks!

[Mike9241]

to get the 179 deduction there has to be business income at least equal to the deduction. you don't specify the type of entity the new business will be. W-2 income is considered business income for the 179 deduction

from IRS Pub 946

The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business.

In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year.

In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Net income or loss from a trade or business includes the following items.
• Section 1231 gains (or losses).
• Interest from working capital of your trade or business.
• Wages, salaries, tips, or other pay earned as an employee.

For information about section 1231 gains and losses, see chapter 3 of Pub. 544.
In addition, figure taxable income without regard to any of the following.
• The section 179 deduction.
• The self-employment tax deduction.
• Any net operating loss carryback or carryforward.
• Any unreimbursed employee business expense

any 179 taken that isn't used becomes a carryforward.

also note that you can take special depreciation instead of 179. there is no business income limitation 

while you say the vehicle is over 6000lbs there is a 179 limit in 2023 of $28900 for heavy SUVs

while a truck or van over 6000lbs gets the full cost

Any personal usage will reduce the deductible amount. also, the vehicle must be placed into service before the end of 2023 so the business must have begun by that date. Reeneue isn't required but some activity must have occurred that indicates the business has started. This could be sending out business cards to potential clients or otherwise advertising the business. Just buying the vehicle doesn't qualify.

[djb77]

"you don't specify the type of entity the new business will be"

Same as the old one, LLC with S-Corp election

"W-2 income is considered business income for the 179 deduction"

Even if the W2 income has nothing to do with the business? The person that earned the W2 wages is involved in the new business, is this what you mean?

" while you say the vehicle is over 6000lbs there is a 179 limit in 2023 of $28900 for heavy SUVs

while a truck or van over 6000lbs gets the full cost"

SUV's over 6000lb retain the full depreciation though right, not just trucks & vans?

The business is already operational, and the vehicle will be 100% business use - we have our daily drivers

[AmeliesUncle]

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@djb77 wrote:

"you don't specify the type of entity the new business will be"

Same as the old one, LLC with S-Corp election

"W-2 income is considered business income for the 179 deduction"

Even if the W2 income has nothing to do with the business? The person that earned the W2 wages is involved in the new business, is this what you mean?

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Because it is in an entity taxed as a corporation, Section 179 is first limited to the corporate profit (including any of the corporate wages paid to you/the officers of the corporation).  So it sounds like Section 179 would not work for you, unless you want it to carry over to the next year.

However, Bonus Depreciation may be a good option if you are looking to claim a loss and you have enough "Basis" in the LLC/Corporation to allow the loss.