Rev. Proc. 75-3

Rev. Proc. 74-23, 1974-2 C.B. 476, provides for an increased standard mileage rate and procedures to be followed by employees or self-employed individuals who claim deductions for the costs of operating passenger automobiles (including vehicles such as pick-up or panel trucks) for business purposes under the simplified method of computing deductible costs of operating passenger automobiles for taxable years beginning after December 31, 1973.

Section 3 of Rev. Proc. 74-23 prescribes the optional method of computing operating costs of automobiles used for business purposes. However, there is no mention of any acceptable optional method that may be used by employees or self-employed individuals who may claim deductions for the costs of operating automobiles used for business purposes where such automobiles have been fully depreciated under the straight-line method for the portion of use attributable to business purposes for taxable years prior to a taxable year for which deductions may be claimed.

If a taxpayer uses the optional method of computing operating costs of an automobile for business purposes for the entire length of time that he uses the vehicle, such period of time is the actual useful life of that vehicle to the taxpayer, and the vehicle will not be considered to have become fully depreciated until the end of such useful life. However, if at any time during the period that the taxpayer used the automobile for business purposes he computed and deducted the actual costs of all operating and fixed costs of the automobile for business purposes for a taxable year, the useful life of the automobile to him would be the estimated period on which he based his computation of the allowable straight-line depreciation deduction for that year. Thereafter, regardless of whether the taxpayer uses the "actual cost" method or the optional method for subsequent taxable years, the automobile will be considered fully depreciated at the end of the period estimated to be its useful life to him.

Therefore, with respect to automobiles that have been or are considered fully depreciated under the straight-line method, based upon their use for business purposes, deductions will be accepted if computed at a standard mileage rate of ten cents per mile for all miles of use of such automobiles attributable to business purposes for taxable years beginning after December 31, 1973.

.Rev. Proc. 74-23 is amplified.

¹ Also released as TIR-1332, dated January 3, 1975.