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

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

This first appeared on Dentaltown.

Send your questions to Tim Lott, CPA, CVA at

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