Table of Contents

Chapter 1 - Auto Rules - Section 1. 1

Apportionment of Personal & Business Use. 1

Car Pool 2

Fines. 2

Parking Fees. 2

Interest Deduction Limit for Individuals. 3

Self-Employed Exception. 3

Property Taxes. 3

Sales Taxes. 3

Sales Tax Deduction for Qualified Vehicles (Expired) - '164. 3

Actual Cost Method. 4

Deduction Limitations. 5

Definition of Car 5

Depreciation & Expensing. 5

Basis. 6

Trade-In of Old Car for New.. 6

Placed in Service. 6

Conversion to Business Use - Lesser of Rule. 6

MACRS - 5 (Actually 6) Years. 7

200%Double Declining Balance Method. 7

150% Declining Balance Method Election. 8

Straight-Line Method Election. 9

Half-Year Convention. 9

Mid-Quarter Convention. 9

Depreciation Caps. 13

Separate Depreciation Caps for Trucks & Vans. 13

Post-Recovery Period Depreciation - Max Reduction Rule. 13

Partial Business Use. 14

Improvements. 15

Bonus (or Additional First-year) Depreciation - '168(k) 15

Expensing - '179. 16

Cost of Car 16

Basis Reduction. 16

Making the '179 Election. 17

Business Use Reduction. 17

SUV Limitation. 17

Predominate Business (More Than 50%) Use Rule. 18

Qualified Business Use. 18

Exclusions. 19

Change From Personal to Business Use. 20

Employee Use of Their Own Car 21

Failure to Meet Predominate Business Use Rule. 21

Later Reduction in Qualified Use. 21

ITC Recapture - Highly Unlikely. 22

Straight-line Depreciation. 22

Excess Depreciation Recapture. 22

Short Tax Year Depreciation Reduction. 23

Auto Leasing. 23

Pros & Cons. 24

Leasing Terminology. 24

Closed-End vs. Open-End Lease. 26

Formula for Monthly Payments. 27

Leasing Deduction Restrictions. 27

Income Inclusion Amount 28

Separate Lease Inclusion Table for Trucks & Vans. 28

Cars Leased For 30 Days or More After 1986. 28

Computation of Inclusion. 29

Nine-Month Following Year Rule. 31

Buying v. Leasing. 31

Chapter 1 - Section 1 Review Questions. 33

Chapter 1 - Auto Rules - Section 2. 35

Standard Mileage Method. 35

Limitations on Standard Mileage Method. 36

Use, Ownership & Prior Depreciation. 36

Switching Methods. 37

Charitable Transportation. 38

Medical Transportation. 38

Auto Trade-In vs. Sale. 38

Working Condition Fringe Benefits. 40

Qualified Transportation - '132(f) 40

Exclusion Limits. 41

Employer-Provided Automobile. 41

General Hypothetical Valuation Method. 41

Special Method #1 - Lease Value. 41

Annual Lease Value - For Entire Calendar Year 42

Fair Market Value. 44

Safe Harbor Value. 44

Items Included in Annual Lease Value Table. 44

Prorated Annual Lease Value - For 30 Days or More. 45

Daily Lease Value - For Less Than 30 Days. 45

Special Method #2 - Cents per Mile. 46

Regular Use - 50% Business. 46

Mileage Rule - 10,000 Miles. 47

Items Included In Cents-Per-Mile Rate. 47

Special Method #3 - Commuting Value. 47

Control Employee. 48

Employer-Provided Transportation in Unsafe Areas. 49

Qualified Employee. 49

Nonpersonal Use Vehicles - 100% Excludable. 50

Clearly Marked Police or Fire Vehicles. 50

Unmarked Law Enforcement Vehicles. 50

Law Enforcement Officer 51

Trucks & Vans. 51

Pickup Truck Guidelines. 51

Van Guidelines. 52

Qualified Automobile Demonstration Use. 52

Full-time Automobile Salesperson. 52

Restrictions on Personal Use. 53

Reporting by Employer 53

Election Not to Withhold for Income Taxes. 53

Value Reported. 53

Accounting Period. 54

Special Accounting Period - Pour Over Method. 54

Chapter 1 - Section 2 Review Questions. 55

Answers & Explanations. 56

Chapter 1 - Section 1 Review Questions Feedback. 56

Chapter 1 - Section 2 Review Questions Feedback. 60

Glossary. 63

Index of Keyword & Phrases. a

CPE Exam Answer Sheet c

Final Examination. d