Page 25 of 59 of Publication 463 17:36 - 21-JAN-2010 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. reimbursement that is more than your adjusted To figure the reduced depreciation deduction You should keep adequate records to prove basis in your car. If you then spend all of the for a car disposed of in 2009, first determine the your expenses or have sufficient evidence that proceeds to acquire replacement property (a depreciation deduction for the full year using will support your own statement. You must gen- new car or repairs to the old car) within a speci- Table 4-1. erally prepare a written record for it to be consid- fied period of time, you do not recognize any If you used a Date Placed in Service line for ered adequate. This is because written evidence gain. Your basis in the replacement property is Jan. 1—Sept. 30, you can deduct one-half of is more reliable than oral evidence alone. How- its cost minus any gain that is not recognized. the depreciation amount figured for the full year. ever, if you prepare a record on a computer, it is See Publication 547 for more information. Figure your depreciation deduction for the full considered an adequate record. year using the rules explained in this chapter Trade-in. When you trade in an old car for a and deduct 50% of that amount with your other What Are Adequate new one, the transaction is considered a actual car expenses. Records? like-kind exchange. Generally, no gain or loss is If you used a Date Placed in Service line for recognized. (For exceptions, see chapter 1 of Publication 544.) In a trade-in situation, your Oct. 1—Dec. 31, you can deduct a percentage You should keep the proof you need in an ac- of the depreciation amount figured for the full count book, diary, log, statement of expense, basis in the new property is generally your ad- justed basis in the old property plus any addi- year. The percentage you use is determined by trip sheets, or similar record. You should also the month you disposed of the car. Figure your keep documentary evidence that, together with earlier.) depreciation deduction for the full year using the your record, will support each element of an,Unadjusted basis tional amount you pay. (See rules explained in this chapter and multiply the expense. Depreciation adjustment when you used the result by the percentage from the following table standard mileage rate. If you used the stan- for the month that you disposed of the car. Documentary evidence. You generally must have documentary evidence, such as receipts, dard mileage rate for the business use of your car, depreciation was included in that rate. The canceled checks, or bills, to support your ex-PercentageMonth rate of depreciation that was allowed in the stan- Jan., Feb., March . . . . . . . . . . .. 12.5% penses. dard mileage rate is shown in the chart that April, May, June . . . . . . . . . . . .. 37.5% Exception. Documentary evidence is not follows. You must reduce your basis in your car July, Aug., Sept. . . . . . . . . . . . .. 62.5% needed if any of the following conditions apply. (but not below zero) by the amount of this depre- Oct., Nov., Dec. . . . . . . . . . . . .. 87.5% • You have meals or lodging expenses ciation. zero) through the use of the standard mileage year filer. See Sale or Other Disposi- you account to your employer under an!Do not use this table if you are a fiscalwhile traveling away from home for whichIf your basis is reduced to zero (but not below rate, and you continue to use your car for busi- CAUTION tion Before the Recovery Period Ends accountable plan, and you use a per diem ness, no adjustment (reduction) to the standard in chapter 4 of Publication 946. and/or lodging. (Accountable plans andallowance method that includes meals mileage rate is necessary. Use the full standard per diem allowances are discussed in mileage rate (55 cents per mile for 2009) for chapter 6.) business miles driven. • Your expense, other than lodging, is less These rates do not apply for any year in than $75. TIP which the actual expenses method was used. 5. • which a receipt is not readily available.You have a transportation expense for Depreciation Year(s) Rate per Mile Adequate evidence. Documentary evi- 2008–2009 $.21 Recordkeeping shows the amount, date, place, and essentialdence ordinarily will be considered adequate if it.192007 2005–2006 .17 character of the expense. 2003–2004 .16 If you deduct travel, entertainment, gift, or trans- For example, a hotel receipt is enough to 2001–2002 .15 portation expenses, you must be able to prove support expenses for business travel if it has all 2000 .14 (substantiate) certain elements of expense. This of the following information. chapter discusses the records you need to keep • The name and location of the hotel. Example. In 2004, you bought a car for ex- to prove these expenses. • The dates you stayed there. clusive use in your business. The car cost If you keep timely and accurate rec- $22,500. From 2004 through 2009, you used the ords, you will have support to show the • Separate amounts for charges such as standard mileage rate to figure your car expense RECORDS IRS if your tax return is ever examined. lodging, meals, and telephone calls. deduction. You drove your car 14,100 miles in You will also have proof of expenses that your 2004, 16,300 miles in 2005, 15,600 miles in employer may require if you are reimbursed A restaurant receipt is enough to prove an 2006, 16,700 miles in 2007, 15,100 miles in under an accountable plan. These plans are expense for a business meal if it has all of the 2008, and 14,900 miles in 2009. Your deprecia- discussed in chapter 6 under Reimbursements. following information. tion is figured as follows. • The name and location of the restaurant. Year Miles x Rate Depreciation • The number of people served. 2004 14,100 × .16 $ 2,256 How To Prove • The date and amount of the expense. 2005 16,300 × .17 2,771 2006 15,600 × .17 2,652 Expenses If a charge is made for items other than food and 2007 16,700 × .19 3,173 beverages, the receipt must show that this is the 2008 15,100 × .21 3,171 case. 2009 14,900 × .21 3,129 Table 5-1 is a summary of records you need to Total depreciation $17,152 prove each expense discussed in this publica- Canceled check. A canceled check, to- tion. You must be able to prove the elements gether with a bill from the payee, ordinarily es- At the end of 2009, your adjusted basis in the car listed across the top portion of the chart. You tablishes the cost. However, a canceled check is $5,348 ($22,500 - $17,152). prove them by having the information and re- by itself does not prove a business expense ceipts (where needed) for the expenses listed in without other evidence to show that it was for a Depreciation deduction for the year of dispo- the first column. business purpose. sition. If you deduct actual car expenses and recovery period, you are allowed a reduced de- ! approximate or estimate. record information in your account book or otherYou do not have toDuplicate information.You cannot deduct amounts that you you dispose of your car before the end of its preciation deduction for the year of disposition. CAUTION record that duplicates information shown on a Chapter 5 Recordkeeping Page 25
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