Internal Revenue Bulletin: 2005-12
March 21, 2005
Table of Contents
01. This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2005, including special tables of limitations on depreciation deductions for trucks and vans, and for passenger automobiles designed to be propelled primarily by electricity and built by an original equipment manufacturer (electric automobiles); and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2005, including a separate table of inclusion amounts for lessees of trucks and vans, and a separate table for lessees of electric automobiles.
02. The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7).
01. For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the passenger automobile is placed in service by the taxpayer and each succeeding year. In the case of electric automobiles placed in service after August 5, 1997, and before January 1, 2007, § 280F(a)(1)(C) requires tripling of these limitation amounts. Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988. For purposes of this revenue procedure, the term “trucks and vans” refers to passenger automobiles that are built on a truck chassis, including minivans and sport utility vehicles (SUVs) that are built on a truck chassis.
02. For leased passenger automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the passenger automobile. The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Under § 1.280F-7(a), this reduction requires the lessees to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. There is a table for lessees of electric automobiles, a table for lessees of trucks and vans, and a table for all other passenger automobiles. Each table shows inclusion amounts for a range of fair market values for each tax year after the passenger automobile is first leased.
01. The limitations on depreciation deductions in section 4.02(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2005, and continue to apply for each tax year that the passenger automobile remains in service.
02. The tables in section 4.03 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2005. Lessees of such passenger automobiles must use these tables to determine the inclusion amount for each tax year during which the passenger automobile is leased. See Rev. Proc. 2002-14, 2002-1 C.B. 450, for passenger automobiles first leased before January 1, 2003, Rev. Proc. 2003-75, 2003-2 C.B. 1018, for passenger automobiles first leased during calendar year 2003, and Rev. Proc. 2004-20, 2004-1 C.B. 642, for passenger automobiles first leased during calendar year 2004.
01. In General.
(1) Limitations on Depreciation Deductions for Certain Automobiles. The limitations on depreciation deductions for passenger automobiles placed in service by the taxpayer for the first time during calendar year 2005 are found in Tables 1 through 3 in section 4.02(2) of this revenue procedure. Table 1 of this revenue procedure provides limitations on depreciation deductions for a passenger automobile. Table 2 of this revenue procedure provides limitations on depreciation deductions for a truck or van. Table 3 of this revenue procedure provides limitations on depreciation deductions for an electric automobile.
(2) Inclusions in Income of Lessees of Passenger Automobiles. A taxpayer first leasing a passenger automobile during calendar year 2005 must determine the inclusion amount that is added to gross income using the tables in section 4.03 of this revenue procedure. The inclusion amount is determined using Table 4 in the case of a passenger automobile (other than a truck, van, or electric automobile), Table 5 in the case of a truck or van, and Table 6 in the case of an electric automobile. In addition, the procedures of § 1.280F-7(a) must be followed.
02. Limitations on Depreciation Deductions for Certain Automobiles.
(1) Amount of the Inflation Adjustment. Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor (the CPI). The new car component of the CPI was 115.2 for October 1987 and 133.0 for October 2004. The October 2004 index exceeded the October 1987 index by 17.8. The Service has, therefore, determined that the automobile price inflation adjustment for 2005 for passenger automobiles (other than trucks and vans) is 15.45 percent (17.8/115.2 x 100%). This adjustment is applicable to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2005. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.1545, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks, vans, and electric automobiles) for calendar year 2005. To determine the dollar limitations applicable to an electric automobile first placed in service during calendar year 2005, the dollar limitations in § 280F(a) are tripled in accordance with § 280F(a)(1)(C) and are then multiplied by a factor of 0.1545; the resulting increases, after rounding to the nearest $100, are added to the tripled 1988 limitations to give the depreciation limitations for calendar year 2005. To determine the dollar limitations applicable to trucks and vans first placed in service during calendar year 2005, the new truck component of the CPI is used instead of the new car component. The new truck component of the CPI was 112.4 for October 1987 and 143.1 for October 2004. The October 2004 index exceeded the October 1987 index by 30.7. The Service has, therefore, determined that the automobile price inflation adjustment for 2005 for trucks and vans is 27.31 percent (30.7/112.4 x 100%). This adjustment is applicable to all trucks and vans that are first placed in service in calendar year 2005. The dollar limitations in § 280F(a) must therefore be multiplied by a factor of 0.2731, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans.
(2) Amount of the Limitation. For passenger automobiles placed in service by the taxpayer in calendar year 2005, Tables 1 through 3 contain the dollar amount of the depreciation limitation for each tax year. Use Table 1 for passenger automobiles placed in service by the taxpayer in calendar year 2005. Use Table 2 for trucks and vans placed in service by the taxpayer in calendar year 2005. Use Table 3 for electric automobiles placed in service by the taxpayer in calendar year 2005.
|REV. PROC. 2005-13 TABLE 1|
|DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES PLACED IN SERVICE BY THE TAXPAYER DURING CALENDAR YEAR 2005|
|1st Tax Year||$2,960|
|2nd Tax Year||$4,700|
|3rd Tax Year||$2,850|
|Each Succeeding Year||$1,675|
|REV. PROC. 2005-13 TABLE 2|
|DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER DURING CALENDAR YEAR 2005|
|1st Tax Year||$3,260|
|2nd Tax Year||$5,200|
|3rd Tax Year||$3,150|
|Each Succeeding Year||$1,875|
|REV. PROC. 2005-13 TABLE 3|
|DEPRECIATION LIMITATIONS FOR ELECTRIC AUTOMOBILES PLACED IN SERVICE BY THE TAXPAYER DURING CALENDAR YEAR 2005|
|1st Tax Year||$8,880|
|2nd Tax Year||$14,200|
|3rd Tax Year||$8,450|
|Each Succeeding Year||$5,125|
03. Inclusions in Income of Lessees of Passenger Automobiles.
The inclusion amounts for passenger automobiles first leased in calendar year 2005 are calculated under the procedures described in § 1.280F-7(a). Lessees of passenger automobiles other than trucks, vans, and electric automobiles should use Table 4 of this revenue procedure in applying these procedures, while lessees of trucks and vans should use Table 5 of this revenue procedure and lessees of electric automobiles should use Table 6 of this revenue procedure.
|REV. PROC. 2005-13 TABLE 4|
|DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS, VANS, OR ELECTRIC AUTOMOBILES) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2005|
|Fair Market Value of Passenger Automobile||Tax Year During Lease|
|Over||Not Over||1st||2nd||3rd||4th||5th & Later|
|REV. PROC. 2005-13 TABLE 5|
|DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2005|
|Fair Market Value of Truck or Van||Tax Year During Lease|
|Over||Not Over||1st||2nd||3rd||4th||5th and Later|
|REV. PROC. 2005-13 TABLE 6|
|DOLLAR AMOUNTS FOR ELECTRIC AUTOMOBILES WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2005|
|Fair Market Value of Electric Automobile||Tax Year During Lease|
|Over||Not Over||1st||2nd||3rd||4th||5th and Later|
This revenue procedure applies to passenger automobiles (other than leased passenger automobiles) that are first placed in service by the taxpayer during calendar year 2005, and to leased passenger automobiles that are first leased by the taxpayer during calendar year 2005.
The principal author of this revenue procedure is Bernard P. Harvey of the Office of Associate Chief Counsel (Passthroughs & Special Industries). For further information regarding the depreciation limitations and lessee inclusion amounts in this revenue procedure, contact Bernard P. Harvey at (202) 622-3110 (not a toll-free call).
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