Question

Julia Wallace, a professional violinist with Lincoln Symphony Orchestra, purchased a 200-year-old antique violin at a cost of $970,000. She thinks that it is a good investment because she knows that it will continue to appreciate in value as a treasured work of art. She plans to use this violin in concerts and wants to know if she can depreciate it as a business-use asset. Prepare a letter memo for the tax file documenting your conclusions.

Answer 1

To: INCOME TAX DEPARTMENT

From: Julia Wallace

Date: March 19, 2019

Subject: Antiques are depreciable when it used as a business asset.

The value of a violin may increase over time, but this very much depends on the violin. Being old does not necessarily mean the violin will increase in value, nor does the fact that it has been used means it is worth more. Antique violin used in concert could depreciate when they used as business use asset

These assets qualify for depreciation when they are:

• Physically used in the normal course of business,
• Subject to wear and tear exhaustion, or obsolescence, and
• Are used for more than one year.

So long as you actually use an antique in your business, it should be depreciable. For example, you could depreciate an antique desk you use in your office. But you can't depreciate an antique you keep as a collectible, not to use in your business. For example, you can't depreciate an antique car you keep stored in a garage and don't actually drive for your business.

If an antique use in your business qualifies, you may depreciate the cost over several years or deduct all or most of the cost in a single year using Section 179 first-year expensing. If you already own antiques that you use in your business but failed to depreciate, you may claim the deductions you overlooked by filing IRS Form 3115.

Artwork -- like paintings and sculpture -- does not qualify for a depreciation deduction because it does not wear out or get used up over time through its regular, active, and physical use in a business. This is one of the principal requirements to take a depreciation deduction.

Depreciation is a tax concept that has nothing to do with real value. However, it has tax consequences if and when you sell or gift the instrument.

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Best regards,

Julia Wallace

CONCLUSION

Antique violin used in concert is depreciated when it used as a business asset.