Tuesday, December 6, 2011

Bill and Hold or Placed in Service for Dental Equipment

And I go to my equipment sales rep for my tax advice too!

My startup office is under construction and won't be ready for moving in until Feb, 2012. As usual, I have placed my equipment order while I did not pay yet. My equipment guy mentioned to me about the "bill and hold strategy" to take advantage of tax deduction. He said I can have tax deduction from my 2011 income if I pay him this year as "bill and hold", and then install the equipment in the new office in 2012.

Hint: ask the vendor about that section of the code that talks about "placed in service"!

My situation is that I established the entity as PLLC and solo proprietor  this year, however, I am now working as an employee in other office, Basically, I have no income from my new office that is under construction.

First question: Do I need to file my 2011 tax return as a PLLC /solo proprietor? (like schedule C). 

Probably and you might have some deductible expenses, it's also possible that won't have any deductible expenses, just depends on the facts.

My second question: Is it a good idea to take advantage of tax deduction with "bill and hold strategy"?

Of course you assume you can deduct it, which you probably can't UNLESS you've placed it in service in 2011 (see hint above).

If that's the case, then on schedule C, I don't have any income. 

That's not a problem; many start-up businesses that open their doors for business at the end of the year might not have income & plenty of expenses...

Can anyone shed some lights on this? Thank you very much!

Sure can, BRIGHT lights TOO!

It might be a good idea to speak with your CPA for year-end tax planning....NOT the equipment sales rep.

Thanks Tim! It's always great that you chime in to answer those questions. I talked to my accountant today as well. Basically, he has the same opinion as you do that the equipment has to be in place and function.

You did mention that I may be able to deduct some expense this year. This is a little bit difference from my accountant. I would like to hear your second opinion. I paid attorney fee, architect fee, part of the construction and equipment cost, and bought some computers and small equipment with my own assets so far. Can I deduct those expenses that incurred in 2010 from my income as an employee if I'll file as a solo proprietor? Thank you very much!
Many of those costs may not be deductible yet, however, they might be:

1. If a computer was placed in service this year to begin planning and tracking your progress

2. Mileage to meet with advisors, planners, shop

3. Other minor expenses similar to those that you might incur this year as well.

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at tlott@dentalcpas.com

For more information or to sign up for our newsletter, please contact arose@dentalcpas.com
Follow us on TwitterFacebook and Pinterest

No comments: