Equipment Leasing for Bonus Depreciation

Classification B or C, depending on the variant. B: legitimate, commonly abused. C: legitimate but aggressive.

Sold as: "equipment leasing program", "passive income plus 100 percent write-off", "container investment", "ATM portfolio", "own the equipment, we manage it"

Four independent walls stand between this deduction and your S corp income, and the promoter's opinion letter usually addresses one of them.

The pitch

OBBBA restored 100 percent bonus depreciation for property placed in service after January 19, 2025. Buy 500,000 dollars of equipment with 150,000 dollars cash and 350,000 dollars of seller financing, take a 500,000 dollar deduction against your S corp income.

What it costs you if it is wrong

Often the loss is not lost but suspended: without material participation Sec. 469 parks it until you have passive income or dispose of the activity, and Sec. 465 does the same for anything financed on a nonrecourse note. Sec. 183 and Sec. 7701(o) are the ones that take it away for good. On aircraft, failing the Sec. 280F more-than-50-percent business use test in a later year recaptures bonus depreciation already taken.

Red flags

The financing is nonrecourse or comes from the seller
The return only works after the tax benefit
Someone else manages the equipment for you
You have not seen the equipment and cannot inspect it
The opinion letter addresses economic substance but not Sec. 469, 465, or 183

Questions to ask the person selling this

1Is the debt recourse, and who is the lender?
2Does the return work before any tax benefit? Show me the pre-tax model.
3Can I go and physically inspect the equipment?
4Who materially participates, and what would my hours have to look like?
5Does the opinion letter address Sec. 469, Sec. 465, and Sec. 183, or only economic substance?

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