But for every upside there can be a downside. The bonus depreciation property has no basis. It will not produce future depreciation, and its sale can produce 100% gain. That gain might be taxed at rates higher than the write-off-year rates, if rates change. In other words, bonus depreciation is a bird-in-the-hand benefit.
The main topic of interest in the proposed regulations is selling property eligible for bonus depreciation within the consolidated group and then deconsolidating the buyer, either through a spin or sale or other transaction. The proposed regulation confirms that the buyer can use the bonus depreciation outside the group, but must leave the group within 90 days. Some are complaining that that is not enough time to take the buyer public or otherwise deconsolidate it.
Bonus depreciation is a remarkably effective tool for taxpayers. Unexpected avenues to use it should be explored.
For more information, please contact Jack Cummings at 919.862.2302.