Are demo models eligible for the depreciation bonus?
In recent days weve received a number of inquiries from AED members about whether demo models are eligible for the depreciation bonus. Although specific to automobiles, we think this example from the IRS depreciation bonus regulations issued last month gives guidance about how the IRS would answer the question: “C, an automobile dealer, uses some of its automobiles as demonstrators in order to show them to prospective customers. The automobiles that are used as demonstrators by C are held by C primarily for sale to customers in the ordinary course of business. On September 1, 2002, D buys from C an automobile that was previously used as a demonstrator by C. D will use the automobile solely for business purposes. The use of the automobile by C does not constitute a “use” for purposes of the original use requirement and, therefore, D will be considered the original purchaser . . . Assuming all other requirements are met, Ds purchase price of the automobile qualifies for the 30-percent ad
