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e-CFR data is current as of September 17, 2020

Title 26Chapter ISubchapter APart 1 → §1.280f-7


Title 26: Internal Revenue
PART 1—INCOME TAXES (CONTINUED)


§1.280F-7   Property leased after December 31, 1986.

(a) Inclusions in income of lessees of passenger automobiles leased after December 31, 1986—(1) In general. If a taxpayer leases a passenger automobile after December 31, 1986, the taxpayer must include in gross income an inclusion amount determined under this paragraph (a), for each taxable year during which the taxpayer leases the automobile. This paragraph (a) applies only to passenger automobiles for which the taxpayer's lease term begins after December 31, 1986. See §§1.280F-5T(d) and 1.280F-5T(e) for rules on determining inclusion amounts for passenger automobiles for which the taxpayer's lease term begins before January 1, 1987. See §1.280F-5T(h)(2) for the definition of fair market value.

(2) Inclusion Amount. For any passenger automobile leased after December 31, 1986, the inclusion amount for each taxable year during which the automobile is leased is determined as follows:

(i) For the appropriate range of fair market values in the applicable table, select the dollar amount from the column for the taxable year in which the automobile is used under the lease (but for the last taxable year during any lease that does not begin and end in the same taxable year, use the dollar amount for the preceding taxable year).

(ii) Prorate the dollar amount for the number of days of the lease term included in the taxable year.

(iii) Multiply the prorated dollar amount by the business/investment use (as defined in §1.280F-6(d)(3)(i)) for the taxable year.

(iv) The following table is the applicable table in the case of a passenger automobile leased after December 31, 1986, and before January 1, 1989:

Dollar Amounts for Automobiles With a Lease Term Beginning in Calendar Year 1987 or 1988

Fair market value of automobileTaxable year during lease   
1st2nd3rd4th5 and later
OverNot over
$12,800$13,100$2$5$7$8$9
13,10013,400614202428
13,40013,7001023344147
13,70014,0001532475765
14,00014,3001941617384
14,30014,60023507489103
14,60014,900275988105122
14,90015,2003168101122140
15,20015,5003577115138159
15,50015,8004087128154178
15,80016,1004496142170196
16,10016,40048105155186215
16,40016,70052114169203234
16,70017,00056123182219253
17,00017,50062135200240277
17,50018,00069150223267309
18,00018,50076166246294340
18,50019,00083181268321371
19,00019,50090196291348402
19,50020,00097211313375433
20,00020,500104226336402465
20,50021,000111242358429496
21,00021,500117257381456527
21,50022,000124272403483558
22,00023,000135295437524605
23,00024,000149325482578667
24,00025,000163356527632729
25,00026,000177386572686792
26,00027,000190416617740854
27,00028,000204447662794917
28,00029,000218477707848979
29,00030,0002325077529021,041
30,00031,0002465387979561,104
31,00032,0002605688421,0101,166
32,00033,0002745998871,0641,228
33,00034,0002886299331,1181,291
34,00035,0003026599781,1721,353
35,00036,0003166901,0231,2261,415
36,00037,0003297201,0681,2801,478
37,00038,0003437511,1131,3341,540
38,00039,0003577811,1581,3881,602
39,00040,0003718111,2031,4421,665
40,00041,0003858421,2481,4961,727
41,00042,0003998721,2931,5501,789
42,00043,0004139021,3381,6041,852
43,00044,0004279331,3831,6581,914
44,00045,0004419631,4281,7121,976
45,00046,0004559941,4731,7662,039
46,00047,0004681,0241,5181,8202,101
47,00048,0004821,0541,5631,8742,164
48,00049,0004961,0851,6081,9282,226
49,00050,0005101,1151,6531,9822,288
50,00051,0005241,1461,6982,0362,351
51,00052,0005381,1761,7432,0902,413
52,00053,0005521,2061,7882,1442,475
53,00054,0005661,2371,8342,1982,538
54,00055,0005801,2671,8792,2522,600
55,00056,0005941,2971,9242,3062,662
56,00057,0006071,3281,9692,3602,725
57,00058,0006211,3582,0142,4142,787
58,00059,0006351,3892,0592,4682,849
59,00060,0006491,4192,1042,5222,912
60,00062,0006701,4652,1712,6033,005
62,00064,0006981,5252,2622,7113,130
64,00066,0007261,5862,3522,8193,255
66,00068,0007531,6472,4422,9273,379
68,00070,0007811,7082,5323,0353,504
70,00072,0008091,7682,6223,1433,629
72,00074,0008371,8292,7123,2513,753
74,00076,0008651,8902,8023,3593,878
76,00078,0008921,9512,8923,4684,003
78,00080,0009202,0122,9823,5764,128
80,00085,0009692,1183,1403,7654,346
85,00090,0001,0382,2703,3654,0354,658
90,00095,0001,1082,4223,5904,3054,969
95,000100,0001,1772,5743,8164,5755,281
100,000110,0001,2822,8024,1544,9805,749
110,000120,0001,4213,1054,6045,5206,372
120,000130,0001,5603,4095,0556,0606,996
130,000140,0001,6993,7135,5056,6007,619
140,000150,0001,8384,0175,9567,1408,243
150,000160,0001,9774,3216,4067,6808,866
160,000170,0002,1164,6256,8578,2219,490
170,000180,0002,2554,9297,3078,76110,113
180,000190,0002,3945,2327,7589,30110,737
190,000200,0002,5335,5368,2089,84111,360

(v) The applicable table in the case of a passenger automobile first leased after December 31, 1988, will be contained in a revenue ruling or revenue procedure published in the Internal Revenue Bulletin.

(3) Example. The following example illustrates the application of this paragraph (a):

Example. On April 1, 1987, A, a calendar year taxpayer, leases and places in service a passenger automobile with a fair market value of $31,500. The lease is to be for a period of three years. During taxable years 1987 and 1988, A uses the automobile exclusively in a trade or business. During 1989 and 1990, A's business/investment use is 45 percent. The appropriate dollar amounts from the table in paragraph (a)(2)(iv) of this section are $260 for 1987 (first taxable year during the lease), $568 for 1988 (second taxable year during the lease), $842 for 1989 (third taxable year during the lease), and $842 for 1990. Since 1990 is the last taxable year during the lease, the dollar amount for the preceding year (the third year) is used, rather than the dollar amount for the fourth year. For taxable years 1987 through 1990, A's inclusion amounts are determined as follows:

Tax yearDollar amountProrationBusiness use (percent)Inclusion amount
1987$260275/365100$196
1988568366/366100568
1989842365/36545379
199084290/3654593

(b) Inclusions in income of lessees of listed property (other than passenger automobiles) leased after December 31, 1986—(1) In general. If listed property other than a passenger automobile is not used predominantly in a qualified business use in any taxable year in which such property is leased, the lessee must add an inclusion amount to gross income in the first taxable year in which such property is not so predominantly used (and only in that year). This year is the first taxable year in which the business use percentage (as defined in §1.280F-6(d)(1)) of the property is 50 percent or less. This inclusion amount is determined under this paragraph (b) for property for which the taxpayer's lease term begins after December 31, 1986 (and under §1.280F-5T(f) for property for which the taxpayer's lease term begins before January 1, 1987). See also §1.280F-5T(g).

(2) Inclusion amount. The inclusion amount for any listed property (other than a passenger automobile) leased after December 31, 1986, is the sum of the amounts determined under subdivisions (i) and (ii) of this subparagraph (2).

(i) The amount determined under this subdivision (i) is the product of the following amounts:

(A) The fair market value (as defined in §1.280F-5T(h)(2)) of the property,

(B) The business/investment use (as defined in §1.280F-6(d)(3)(i)) for the first taxable year in which the business use percentage (as defined in §1.280F-6(d)(1)) is 50 percent or less, and

(C) The applicable percentage from the following table:

Type of property First taxable year during lease in which business use percentage is 50% or less
123456789101112 and Later
Property with a recovery period of less than 7 years under the alternative depreciation system (such as computers, trucks and airplanes)2.1−7.2−19.8−20.1−12.4−12.4−12.4−12.4−12.4−12.4−12.4−12.4
Property with a 7- to 10-year recovery period under the alternative depreciation system (such as recreation property)3.9−3.8−17.7−25.1−27.8−27.2−27.1−27.6−23.7−14.7−14.7−14.7
Property with a recovery period of more than 10 years under the alternative depreciation system (such as certain property with no class life)6.6−1.6−16.9−25.6−29.9−31.1−32.8−35.1−33.3−26.7−19.7−12.2

(ii) The amount determined under this subdivision (ii) is the product of the following amounts:

(A) The fair market value of the property,

(B) The average of the business/investment use for all taxable years (in which such property is leased) that precede the first taxable year in which the business use percentage is 50 percent or less, and

(C) The applicable percentage from the following table:

Type of property First taxable year during lease in which business use percentage is 50% or less
123456789101112 and Later
Property with a recovery period of less than 7 years under the alternative depreciation system (Such as computers, trucks and airplanes)0.010.022.021.212.712.712.712.712.712.712.712.7
Property with a 7- to 10-year recovery period under the alternative depreciation system (such as recreation property)0.09.323.831.333.832.731.630.525.015.015.015.0
Property with a recovery period of more than 10 years under the alternative depreciation system (such as certain property with no class life)0.010.126.335.439.640.240.841.437.529.220.812.5

(3) Example. The following example illustrates the application of this paragraph (b):

Example. On February 1, 1987, B, a calendar year taxpayer, leases and places in service a computer with a fair market value of $3,000. The lease is to be for a period of two years. B's qualified business use of the property, which is the only business/investment use, is 80 percent in taxable year 1987, 40 percent in taxable year 1988, and 35 percent in taxable year 1989. B must add an inclusion amount to gross income for taxable year 1988, the first taxable year in which B does not use the computer predominantly for business (i.e., the first taxable year in which B's business use percentage is 50 percent or less). Since 1988 is the second taxable year during the lease, and since the computer has a 5-year recovery period under the General and Alternative Depreciation Systems, the applicable percentage from the table in subdivision (i) of paragraph (b)(2) is −7.2%, and the applicable percentage from the table in subdivision (ii) is 10%. B's inclusion amount is $154, which is the sum of the amounts determined under subdivisions (i) and (ii) of subparagraph (b)(2) of this paragraph. The amount determined under subdivision (i) is −$86 [$3,000 × 40% × (−7.2%)], and the amount determined under subdivision (ii) is $240 [$3,000 × 80% × 10%].

[T.D. 8218, 53 FR 29881, Aug. 9, 1988; 53 FR 32821, Aug. 26, 1988, as amended by T.D. 8298, 55 FR 13370, Apr. 12, 1990; Redesignated and amended at T.D. 8473, 58 FR 19060, Apr. 12, 1993; T.D. 9133, 69 FR 35515, June 25, 2004; T.D. 9483, 75 FR 27937, May 19, 2010]

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