{"data":{"id":"us/26-cfr-1.280f-7","jurisdiction":"us","citation":"26 CFR 1.280F-7","heading":"F-7 Property leased after December 31, 1986.","body":"(a) Inclusions in income of lessees of passenger automobiles leased after December 31, 1986—(1) In general. If a taxpayer leases a passenger automobile after December 31, 1986, the taxpayer must include in gross income an inclusion amount determined under this paragraph (a), for each taxable year during which the taxpayer leases the automobile. This paragraph (a) applies only to passenger automobiles for which the taxpayer's lease term begins after December 31, 1986. See §§ 1.280F-5T(d) and 1.280F-5T(e) for rules on determining inclusion amounts for passenger automobiles for which the taxpayer's lease term begins before January 1, 1987. See § 1.280F-5T(h)(2) for the definition of fair market value.\n(2) Inclusion Amount. For any passenger automobile leased after December 31, 1986, the inclusion amount for each taxable year during which the automobile is leased is determined as follows:\n(i) For the appropriate range of fair market values in the applicable table, select the dollar amount from the column for the taxable year in which the automobile is used under the lease (but for the last taxable year during any lease that does not begin and end in the same taxable year, use the dollar amount for the preceding taxable year).\n(ii) Prorate the dollar amount for the number of days of the lease term included in the taxable year.\n(iii) Multiply the prorated dollar amount by the business/investment use (as defined in § 1.280F-6(d)(3)(i)) for the taxable year.\n(iv) The following table is the applicable table in the case of a passenger automobile leased after December 31, 1986, and before January 1, 1989:\nDollar Amounts for Automobiles With a Lease Term Beginning in Calendar Year 1987 or 1988\nFair market value of automobile Taxable year during lease\n1st 2nd 3rd 4th 5 and later\nOver Not over\n$12,800 $13,100 $2 $5 $7 $8 $9\n13,100 13,400 6 14 20 24 28\n13,400 13,700 10 23 34 41 47\n13,700 14,000 15 32 47 57 65\n14,000 14,300 19 41 61 73 84\n14,300 14,600 23 50 74 89 103\n14,600 14,900 27 59 88 105 122\n14,900 15,200 31 68 101 122 140\n15,200 15,500 35 77 115 138 159\n15,500 15,800 40 87 128 154 178\n15,800 16,100 44 96 142 170 196\n16,100 16,400 48 105 155 186 215\n16,400 16,700 52 114 169 203 234\n16,700 17,000 56 123 182 219 253\n17,000 17,500 62 135 200 240 277\n17,500 18,000 69 150 223 267 309\n18,000 18,500 76 166 246 294 340\n18,500 19,000 83 181 268 321 371\n19,000 19,500 90 196 291 348 402\n19,500 20,000 97 211 313 375 433\n20,000 20,500 104 226 336 402 465\n20,500 21,000 111 242 358 429 496\n21,000 21,500 117 257 381 456 527\n21,500 22,000 124 272 403 483 558\n22,000 23,000 135 295 437 524 605\n23,000 24,000 149 325 482 578 667\n24,000 25,000 163 356 527 632 729\n25,000 26,000 177 386 572 686 792\n26,000 27,000 190 416 617 740 854\n27,000 28,000 204 447 662 794 917\n28,000 29,000 218 477 707 848 979\n29,000 30,000 232 507 752 902 1,041\n30,000 31,000 246 538 797 956 1,104\n31,000 32,000 260 568 842 1,010 1,166\n32,000 33,000 274 599 887 1,064 1,228\n33,000 34,000 288 629 933 1,118 1,291\n34,000 35,000 302 659 978 1,172 1,353\n35,000 36,000 316 690 1,023 1,226 1,415\n36,000 37,000 329 720 1,068 1,280 1,478\n37,000 38,000 343 751 1,113 1,334 1,540\n38,000 39,000 357 781 1,158 1,388 1,602\n39,000 40,000 371 811 1,203 1,442 1,665\n40,000 41,000 385 842 1,248 1,496 1,727\n41,000 42,000 399 872 1,293 1,550 1,789\n42,000 43,000 413 902 1,338 1,604 1,852\n43,000 44,000 427 933 1,383 1,658 1,914\n44,000 45,000 441 963 1,428 1,712 1,976\n45,000 46,000 455 994 1,473 1,766 2,039\n46,000 47,000 468 1,024 1,518 1,820 2,101\n47,000 48,000 482 1,054 1,563 1,874 2,164\n48,000 49,000 496 1,085 1,608 1,928 2,226\n49,000 50,000 510 1,115 1,653 1,982 2,288\n50,000 51,000 524 1,146 1,698 2,036 2,351\n51,000 52,000 538 1,176 1,743 2,090 2,413\n52,000 53,000 552 1,206 1,788 2,144 2,475\n53,000 54,000 566 1,237 1,834 2,198 2,538\n54,000 55,000 580 1,267 1,879 2,252 2,600\n55,000 56,000 594 1,297 1,924 2,306 2,662\n56,000 57,000 607 1,328 1,969 2,360 2,725\n57,000 58,000 621 1,358 2,014 2,414 2,787\n58,000 59,000 635 1,389 2,059 2,468 2,849\n59,000 60,000 649 1,419 2,104 2,522 2,912\n60,000 62,000 670 1,465 2,171 2,603 3,005\n62,000 64,000 698 1,525 2,262 2,711 3,130\n64,000 66,000 726 1,586 2,352 2,819 3,255\n66,000 68,000 753 1,647 2,442 2,927 3,379\n68,000 70,000 781 1,708 2,532 3,035 3,504\n70,000 72,000 809 1,768 2,622 3,143 3,629\n72,000 74,000 837 1,829 2,712 3,251 3,753\n74,000 76,000 865 1,890 2,802 3,359 3,878\n76,000 78,000 892 1,951 2,892 3,468 4,003\n78,000 80,000 920 2,012 2,982 3,576 4,128\n80,000 85,000 969 2,118 3,140 3,765 4,346\n85,000 90,000 1,038 2,270 3,365 4,035 4,658\n90,000 95,000 1,108 2,422 3,590 4,305 4,969\n95,000 100,000 1,177 2,574 3,816 4,575 5,281\n100,000 110,000 1,282 2,802 4,154 4,980 5,749\n110,000 120,000 1,421 3,105 4,604 5,520 6,372\n120,000 130,000 1,560 3,409 5,055 6,060 6,996\n130,000 140,000 1,699 3,713 5,505 6,600 7,619\n140,000 150,000 1,838 4,017 5,956 7,140 8,243\n150,000 160,000 1,977 4,321 6,406 7,680 8,866\n160,000 170,000 2,116 4,625 6,857 8,221 9,490\n170,000 180,000 2,255 4,929 7,307 8,761 10,113\n180,000 190,000 2,394 5,232 7,758 9,301 10,737\n190,000 200,000 2,533 5,536 8,208 9,841 11,360\n(v) The applicable table in the case of a passenger automobile first leased after December 31, 1988, will be contained in a revenue ruling or revenue procedure published in the Internal Revenue Bulletin.\n(3) Example. The following example illustrates the application of this paragraph (a):\nExample.\nOn April 1, 1987, A, a calendar year taxpayer, leases and places in service a passenger automobile with a fair market value of $31,500. The lease is to be for a period of three years. During taxable years 1987 and 1988, A uses the automobile exclusively in a trade or business. During 1989 and 1990, A's business/investment use is 45 percent. The appropriate dollar amounts from the table in paragraph (a)(2)(iv) of this section are $260 for 1987 (first taxable year during the lease), $568 for 1988 (second taxable year during the lease), $842 for 1989 (third taxable year during the lease), and $842 for 1990. Since 1990 is the last taxable year during the lease, the dollar amount for the preceding year (the third year) is used, rather than the dollar amount for the fourth year. For taxable years 1987 through 1990, A's inclusion amounts are determined as follows:\nTax year Dollar amount Proration Business use (percent) Inclusion amount\n1987 $260 275/365 100 $196\n1988 568 366/366 100 568\n1989 842 365/365 45 379\n1990 842 90/365 45 93\n(b) Inclusions in income of lessees of listed property (other than passenger automobiles) leased after December 31, 1986—(1) In general. If listed property other than a passenger automobile is not used predominantly in a qualified business use in any taxable year in which such property is leased, the lessee must add an inclusion amount to gross income in the first taxable year in which such property is not so predominantly used (and only in that year). This year is the first taxable year in which the business use percentage (as defined in § 1.280F-6(d)(1)) of the property is 50 percent or less. This inclusion amount is determined under this paragraph (b) for property for which the taxpayer's lease term begins after December 31, 1986 (and under § 1.280F-5T(f) for property for which the taxpayer's lease term begins before January 1, 1987). See also § 1.280F-5T(g).\n(2) Inclusion amount. The inclusion amount for any listed property (other than a passenger automobile) leased after December 31, 1986, is the sum of the amounts determined under subdivisions (i) and (ii) of this subparagraph (2).\n(i) The amount determined under this subdivision (i) is the product of the following amounts:\n(A) The fair market value (as defined in § 1.280F-5T(h)(2)) of the property,\n(B) The business/investment use (as defined in § 1.280F-6(d)(3)(i)) for the first taxable year in which the business use percentage (as defined in § 1.280F-6(d)(1)) is 50 percent or less, and\n(C) The applicable percentage from the following table:\nType of property First taxable year during lease in which business use percentage is 50% or less\n1 2 3 4 5 6 7 8 9 10 11 12 and Later\nProperty with a recovery period of less than 7 years under the alternative depreciation system (such as computers, trucks and airplanes) 2.1 −7.2 −19.8 −20.1 −12.4 −12.4 −12.4 −12.4 −12.4 −12.4 −12.4 −12.4\nProperty with a 7- to 10-year recovery period under the alternative depreciation system (such as recreation property) 3.9 −3.8 −17.7 −25.1 −27.8 −27.2 −27.1 −27.6 −23.7 −14.7 −14.7 −14.7\nProperty with a recovery period of more than 10 years under the alternative depreciation system (such as certain property with no class life) 6.6 −1.6 −16.9 −25.6 −29.9 −31.1 −32.8 −35.1 −33.3 −26.7 −19.7 −12.2\n(ii) The amount determined under this subdivision (ii) is the product of the following amounts:\n(A) The fair market value of the property,\n(B) The average of the business/investment use for all taxable years (in which such property is leased) that precede the first taxable year in which the business use percentage is 50 percent or less, and\n(C) The applicable percentage from the following table:\nType of property First taxable year during lease in which business use percentage is 50% or less\n1 2 3 4 5 6 7 8 9 10 11 12 and Later\nProperty with a recovery period of less than 7 years under the alternative depreciation system (Such as computers, trucks and airplanes) 0.0 10.0 22.0 21.2 12.7 12.7 12.7 12.7 12.7 12.7 12.7 12.7\nProperty with a 7- to 10-year recovery period under the alternative depreciation system (such as recreation property) 0.0 9.3 23.8 31.3 33.8 32.7 31.6 30.5 25.0 15.0 15.0 15.0\nProperty with a recovery period of more than 10 years under the alternative depreciation system (such as certain property with no class life) 0.0 10.1 26.3 35.4 39.6 40.2 40.8 41.4 37.5 29.2 20.8 12.5\n(3) Example. The following example illustrates the application of this paragraph (b):\nExample.\nOn February 1, 1987, B, a calendar year taxpayer, leases and places in service a computer with a fair market value of $3,000. The lease is to be for a period of two years. B's qualified business use of the property, which is the only business/investment use, is 80 percent in taxable year 1987, 40 percent in taxable year 1988, and 35 percent in taxable year 1989. B must add an inclusion amount to gross income for taxable year 1988, the first taxable year in which B does not use the computer predominantly for business (i.e., the first taxable year in which B's business use percentage is 50 percent or less). Since 1988 is the second taxable year during the lease, and since the computer has a 5-year recovery period under the General and Alternative Depreciation Systems, the applicable percentage from the table in subdivision (i) of paragraph (b)(2) is −7.2%, and the applicable percentage from the table in subdivision (ii) is 10%. B's inclusion amount is $154, which is the sum of the amounts determined under subdivisions (i) and (ii) of subparagraph (b)(2) of this paragraph. The amount determined under subdivision (i) is −$86 [$3,000 × 40% × (−7.2%)], and the amount determined under subdivision (ii) is $240 [$3,000 × 80% × 10%].","path":["Title 26—Internal Revenue","CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY","SUBCHAPTER A—INCOME TAX","PART 1—INCOME TAXES"],"source_url":"https://www.ecfr.gov/api/versioner/v1/full/2026-08-25/title-26.xml","current_through":"2026-08-25","vintage":"","retrieved_at":"2026-08-27T02:25:11Z","sha256":"6ededbdc01b9e622b6a68f1a4c2ef71d6fe001ff9e11bcc73dde24860e6a1462","source_id":"us-cfr","stale":true,"prev":"us/26-cfr-1.280f-6","next":"us/26-cfr-1.280g-1"},"notice":"GroundRules: Original legal text. Not legal advice."}