Floor Plan Financing Indebtedness

Floor plan financing interest expense is interest paid or accrued on floor plan financing indebtedness.

Floor plan financing indebtedness. For example automobile dealerships utilize floor plan financing to run their businesses. Floor plan financing interest. 1 163 j 1 b 16 and 17. The term floor plan financing interest applies to indebtedness used to finance the acquisition of motor vehicles held for sale or lease and secured by the inventory so acquired prop.

For example if you own an automobile dealership and paid. Unlike former section 163 j which only applied to corporations and was considered primarily to address what the government viewed to be earnings stripping cross border debt financings new. Further any amount treated as interest under the internal revenue code is interest for purposes of the business interest limitation. Floor planning is a form of financing for large ticket items displayed on showroom floors.

Floor plan financing interest is interest on floor plan financing indebtedness which is indebtedness used to finance the acquisition of motor vehicles boats or farm machinery for sale or lease and secured by the inventory acquired with the proceeds of the indebtedness sec. Using cash or a bank line of credit to purchase inventory can work for some car dealers but many floor plan financing companies offer a variety of dealer specific benefits. Code 168 k allows for 100 percent depreciation of qualified property that is placed into service through december 31 2022 but limits qualified property and does not include any property used in a trade or business that has had floor plan financing indebtedness as defined in paragraph 9 of section 163 j. Floor plan financing indebtedness is indebtedness that is used to finance the acquisition of motor vehicles held for sale or lease and that is secured by the acquired inventory.

Definition of floor plan financing interest expense following the changes made to the statute discussed above the proposed regulations provide that certain business interest expense paid or accrued on indebtedness used to acquire an inventory of motor vehicles is deductible without regard to the irc 163 j limitation. B floor plan financing indebtedness the term floor plan financing indebtedness means indebtedness i used to finance the acquisition of motor vehicles held for sale or lease and. Business interest is considered any interest paid or accrued on indebtedness properly allocable to a trade or business. How does floor plan financing work specifically to benefit auto dealers.