What Does Placed in Service Mean in Legal Terms?
Definition & meaning
"Placed in service" refers to the moment when a fixed asset, such as machinery or equipment, is first used for its intended purpose. This date is crucial for accounting practices, as it marks the beginning of the asset's depreciation period. Understanding the placed in service date is essential for accurately calculating tax deductions related to the asset. It's important to note that the purchase date of an asset does not always coincide with its placed in service date.
Legal use & context
The term "placed in service" is commonly used in accounting and tax law. It is particularly relevant in contexts involving fixed assets that can be depreciated for tax purposes. Businesses must accurately determine this date to comply with tax regulations and ensure proper financial reporting. Users can manage related forms and procedures effectively with tools like US Legal Forms, which provide templates drafted by qualified attorneys.
Real-world examples
Here are a couple of examples of abatement:
Example 1: A company purchases a delivery truck on March 1, 2023. However, the truck is not used until April 15, 2023, when it is first driven for deliveries. Therefore, the placed in service date is April 15, 2023.
Example 2: A manufacturing plant installs a new machine on June 1, 2023, but the machine is not operational until June 20, 2023. The placed in service date is June 20, 2023.