Recent tax legislation has significantly accelerated the depreciation deductions for certain assets used in a trade or business. Recreational vehicles used in a trade or business generally qualify for this beneficial treatment. The benefits are available through two separate depreciation provisions.

Internal Revenue Code Section 179 allows certain business taxpayers to expense a portion of its asset acquisition costs in the year the assets are acquired. Absent this provision, the assets would generally be depreciated over their established tax life. Prior to recent legislative changes, the ai-nount of asset acquisition costs eligible for first year deduction under Section 179 was limited to $25.000. The 200' ) Jobs and Growth Tax Relief Reconciliation Act increases this limitation to $100,000 for tax years 2003 - 2005.

In addition to the Section 179 deduction, the 2003 Act also allows 50% of the cost of a new recreational vehicle used exclusively in a trade or business to be deducted in the year of acquisition. This provision works after application of Section 179, so that $1 00,000 can be deducted via Section 179 and then 50% of the remaining cost can be expensed under this provision. Any remaining acquisition cost is depreciated over the normal tax depreciation life of the asset.

Example: In 2003 Corporation A purchases a new recreational vehicle for $300,000 that will be used exclusively in its trade or business. Corporation A has no other asset acquisitions during the year. Assuming all other eligibility criteria are satisfied that will allow the corporation to fully utilize Section 179, the following deduction would be available to the corporation in 2003:

Section 179 first year expense	$100,000
510% of remaining $200,000 acquisition cost	100,000
Depreciation on remaining $1 00,000 of cost
(assuming 5 yr MACRS, half year convention)	20,000
Total first year deduction	$220,000

Note that there are a number of restrictions or circumstances that could impact a taxpayer's ability to use Section 179 and the 50% first year deduction provisions. Some of these restrictions are provided below. However, this list is not complete and you should consult your tax advisor to determine how these provisions will impact your specific business. 0.

Limitations Under Section 179
1. The amount eligible to be expensed under Section 179 is reduced dollar for dollar to the extent that a businesses acquisition of depreciable property exceeds $400,000 during the tax year.

2. The amount of the Section 179 deduction is limited to the businesses taxable income for the tax year. However, Section 179 amounts that are unused due to the taxable income limitation generally carryforward for possible deduction in future tax years.

3. The Section 179 amount and the availability of the first year 50% deduction can be severely reduced or eliminated if there is personal (non-business) use of the asset. It may be possible for the business to charge an employee/owner for any personal use in order to avoid this limitation. Check with your personal tax advisor on this issue.

4. If the business entity is a flow-through entity (S-Corp, partnership), the Section 179 limitations generally apply at the entity, and at the shareholder or partner level.