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Solved

"Placed in service" vs. date of acquisition for a vehicle--Form 8936

Forum|Forum|3 years ago
December 10, 2022
5 replies
0 views

This question is re: the wording of IRS Form 8936: https://www.irs.gov/instructions/i8936

The key part of the qualifying for the electric vehicle credit (for me) is the instruction that reads: "You placed the vehicle in service during your tax year."

I have a Chevy Bolt being delivered to a dealership in late December. If I sign the paperwork for it and take ownership on 1/1/23 or later, does that date become the "Placed in service" date? Or is that date determined by the arrival at the dealership and when it was available to me? I do not have a signed binding contract from the date of the order of the vehicle. It was ordered as part of a replacement program as per GM's recall of the Chevy Bolt.

Any clarification is greatly appreciated. Thank you.

Best answer by Critter-3

Ok ... there is a difference between a business definition of "placed in service" & "date of aquisition" is not the same as being the legal owner of the vehicle. The date that you sign for the car to take legal ownership/title to it which determines when you can take the EV credit.

AmeliesUncle

@harlanpepper wrote:
If I sign the paperwork for it and take ownership on 1/1/23 or later, does that date become the "Placed in service" date?

Yes. It is not "placed in service" until you take ownership of it (by signing for it).

harlanpepperAuthor

Thank you. That makes sense to me. The context is a little more complicated than a typical car acquisition that I hope doesn't change the takeaway.

If anyone cares to read, there's more info here: https://www.reddit.com/r/tax/comments/zhw84u/placed_in_service_vs_date_of_acquisition_for_a/

Critter-3Answer

privacio

There is also the opposite case. Let's use an example where a vehicle is purchased by an individual (not a business), delivered, taken possession of, and placed in service on 12/30/2022. The title application is submitted to the local DMV, but it may not be processed for a few weeks.

IRC Section 30D (see https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d, the full text of 30D, and various notices) defines acquisition as "For purposes of the 30D credit, a vehicle is not considered acquired prior to the time when title to the vehicle passes to the taxpayer under state law.". It uses the "acquisition" term. Section 30D, however, does not seem to mention anything related to "acquision" when discussing Dec 31 2022/Jan 1 2023 and the term is only used in some specific instances. At the same time, the same guidance also uses terms "purchased", "delivered", "take possession", "place in service", or even "sold" when referring to various milestones, for example "Vehicles Purchased and Delivered between August 16, 2022 and December 31, 2022" or "If you purchase and take possession of a qualifying electric vehicle after August 16, 2022 and before January 1, 2023".

On the other hand, the Inflation Reduction Act text specifies "Except as provided in paragraphs (2), (3), (4), and (5), the amendments made by this section shall apply to vehicles placed in service after December 31, 2022.", using the "placed in service" term. Here we ignore the exceptions such as Final Assembly requirement for simplicity, we can assume this example meets the NA Final Assembly criteria.

So would the vehicle in question, purchased, delivered, and placed in service on 12/30/2022 be eligible for tax credit in tax year 2022, under the pre-IRA rules or does the acquisition date play a role?

aclsmb1smbacl

Yep, I agree lots of terms without clear definitions and seemingly used almost interchangeably and/or used differently in the same context or different context. Per the 6 bullet point list of basic/summary rules for qualifying directly from the instructions in IRS Form 8936 only mentions this “Date Placed in Service” concept (2nd bullet point below) which matches Line 3 of the actual form (Enter date vehicle was placed in service (MM/DD/YYYY)), but somehow the acquisition date seems to be used or applied…as Turbo Tax asks for it in the walkthrough wizard…although it is not on the actual IRS 8936 form…which suggests if you filed manually the acquisition date would not be captured anywhere. Anyway, the issue is how Line 3, “Enter date vehicle was placed in service (MM/DD/YYYY)” is actually defined…per Turbo Tax and EV Forums I have been told it is one of the 9 definitions I listed below and that the whatever specific definition “they” provided was 100% accurate and that every other definition provided by someone else counter to “their” definition was absolutely wrong and if used would constitute tax fraud. 🤔 🤔😏🙄😣 I’m exaggerating slightly to try to be a little light hearted about this whole thing because it is very confusing and really quite ridiculous and because some people have some pretty strong opinions in these various forums about the information they are providing. 🙂

Having said that I found this legal settlement or court ruling that makes me personally believe (although I’m sure anyone who disagrees will tell me that I’m committing tax fraud if I use that definition…🙂), that the definition for Line 3 is pretty straightforward like the IRS probably originally intended…and that is #2 below…which is take physical possession by driving the vehicle off the dealership’s lot…as you cannot place the vehicle in service for one’s own personal or business purpose without having physical possession unless…

one had a business that involved purchasing or leasing a new vehicle, adding a billboard on top of the vehicle, keeping the vehicle at the dealership, and receiving payment for the advertisement or one had a business to purchase or lease a new vehicles from the dealership so that the dealership could then use the vehicle as a loaner or test drive vehicle that you got paid for maybe like a modified Turo scenario, but where the car was kept at the dealership instead of you physically driving it off the lot. 😀 Again there are always outlier cases and ridiculous arguments that could be made to identify an exception to the rule.

https://www.currentfederaltaxdevelopments.com/blog/2015/11/20/electric-vehicle-not-placed-in-service-by-year-end-credit-denied?format=amp

And just to be comprehensive…I personally think that the “Transition Rule for the IRA” with the definition of “Written Binding Contracts” makes a lot of sense and was smart and fair because it specifically addressed the fact that many consumers were in limbo when the law essentially came out of nowhere…meaning if the “traditional definition” and use of the requirements specified in 8936 “Date Placed in Service” was immediately applied when the law went into effect…all those customers who placed orders or “purchased” EVs before that August 16th date, but had not taken delivery because their cars were not available (built and/or physically available to take possession?) would have been negatively impacted. I think the lawmakers, the President, and the IRS correctly understood that because there is/has been an EV shortage and lots of people had already placed orders or signed “Written Binding Contracts” with a dealer for a future delivery date for their vehicle (when the law came out of nowhere), they needed to give those people a path forward to still qualify for the tax credit using 8936…instead of essentially punishing them with this new IRA law. But again that is just my simple minded opinion…that I’m sure many will disagree with me.

From Instructions on IRS Form 8936…

The following requirements must be met to qualify for the credit.
• You are the owner of the vehicle. If the vehicle is leased, only the lessor and not the lessee, is entitled to the credit.
• You placed the vehicle in service during your tax year.
• The vehicle is manufactured primarily for use on public streets, roads, and highways.
• The original use of the vehicle began with you.

• You acquired the vehicle for use or to lease to others, and not for resale.
• You use the vehicle primarily in the United States.

—————

The 9 possible definitions for Line 3 in IRS Form 8936, “Enter date vehicle was placed in service (MM/DD/YYYY)”:

1. Date I signed the purchase agreement

2. Date I take physical possession (drive it off the dealership’s lot)

3. Date I take legal possession (which may or may not be the same as #2)

4. Date the loan is approved

5. Date on the title application

6. Date on the DMV registration application

7. Date I legally acquired the vehicle (which may or may not be #1, 2, 3, or 😎

8. Date I purchased the vehicle (which I assumed was #1, but again sounds like it could be one of the others since maybe a purchase is not complete until there has been an exchange of goods which means I have to take physical possession since I have funded the purchase but have not received anything in return?)

9. Date I take legal ownership (which may or may not be #1, 2, 3, 4, 5, 6, 7, 8 above?)

privacio

Thank you for that thorough response.

Your interpretation sounds reasonable, and aligns with many definitions of "placed in service" across various resources. But it seems that even with the thoroughness of your of research, there still remains a high level of ambiguity and uncertainty, which makes tax/financial planning difficult.

Taxpayers may attempt to gather enough evidence to meet as many of the 9 bullet points as possible. Proving 1, 4, 5, 6 should be straightforward using the documents established during the sales process. However, is there a recommendation how to exactly determine and prove 2, 3, 7, 8, and 9?

dmbranco

What is the rule for eligible vehicles ordered between August 16, 2022 and December 31, 2022 (some payment made upon ordering) with delivery and main payment taking place in January, 2023?

Thank you

EchoRomeo

Hello,

I just came across this thread and, given the ambiguity around "placed in service," was idly wondering if my 2022 Bolt EUV, which I purchased in Oct of last year might still somehow qualify for the tax credit that kicked in for GM on Jan 1. My reasoning is that if I financed the car last year and then am paying it off this year, and in doing so getting the actual title in 2023, could "date of acquisition" actually be considered 2023 for tax credit purposes?

I would have waited until 2023 to get the car but in Oct last year everyone was saying GM still wouldn't qualify for the full $7500 after Jan 1 b/c of the battery sourcing requirement. Really wish I hadn't listened to the news media and had just waited to see how Biden actually implemented the IRA.

Thanks!

Eric

aguilarpierre

I have a question about this. If I purchased a used vehicle that qualifies for tax credit would the in service date be date I purchased? Or is it when original owner purchased?

JohnW152

The placed-in-service date would be the date that you placed the vehicle into service, which would be on or after your purchase date.

Although the IRS hasn't released TY 2023 instructions for Form 8936, Clean Vehicle Credits reflecting this new part of the credit, this interpretation would be consistent with existing tax policy. Last year's Instructions for Form 8936 (01/2023) indicate simply that a taxpayer should "[u]se Form 8936 to figure your credit for qualified plug-in electric drive motor vehicles you placed in service during your tax year." [Emphasis mine.]

See the IRS' Used Clean Vehicle Credit for all qualification requirements.

@aguilarpierre