Rev. Proc. 81-54

This revenue procedure modifies Rev. Proc. 80-7, 1980-1 C.B. 590, as modified by Rev. Proc. 80-32, 1980-2 C.B. 767, regarding deductions under the optional standard mileage rates for the business use of an automobile and deductions for transportation expenses relating to charitable contributions, medical expenses, and moving expenses.

The following paragraph is inserted after the third paragraph of subparagraph I of section 3.01 of Rev. Proc. 80-7:

The Accelerated Cost Recovery System (ACRS) of depreciation was added as section 168 of the Code by Section 201 of the Economic Recovery Tax Act of 1981, page 256, 275, this Bulletin. ACRS does not apply to automobiles that were placed in service before January 1, 1981. Although the use of ACRS is mandatory, a taxpayer may elect to exclude an automobile under section 168(e)(2). A taxpayer who uses the standard mileage rate for the first tax year that an automobile is placed in service after December 31, 1980, will be considered to have made an election under section 168(e)(2) to exclude the automobile from ACRS.

The fourth and fifth paragraphs of subparagraph 2 of section 3.01 of Rev. Proc. 80-7, concern the requirement that, for the optional method, an automobile that has been used for 5 years is considered to be fully depreciated. These paragraphs are deleted and the following paragraphs are inserted in their place:

An automobile used by a taxpayer who uses the optional method of computing costs of an automobile for business purposes is considered to have a useful life of a total of 60,000 miles of business use at the maximum standard mileage rate determined without reference to the age of the vehicle. After 60,000 miles of business use at the maximum standard mileage rate, the automobile will be considered fully depreciated.

If before January 1, 1981, a taxpayer used an automobile for business purposes and used the "actual cost" method to compute costs of the automobile, the useful life of the automobile to the taxpayer is the estimated period on which he or she based the computation of the allowable straightline depreciation deduction for that year. This rule applies although the taxpayer uses the optional method in later tax years. Under such circumstances the automobile will be considered fully depreciated at the end of the period estimated to be its useful life to the taxpayer.

The preceding two paragraphs are effective for transportation expenses paid or incurred after December 31, 1979.

EFFECT ON OTHER DOCUMENTS

Rev. Proc. 80-7 is modified.