One Company Buys Equipment Another Company Uses

Start with ownership, financing, use and any lease or transfer. The company making a payment and the company using the asset are not automatically the same taxpayer entitled to depreciation.

A business-owner scenario

A construction owner buys a machine through a cash-rich entity but assigns it to a newer operating company. The title, insurance, loan and books now point to different businesses. A review must explain the actual acquisition and operating arrangement.

Illustrative scenario, not a client result.

Work through the transaction

Reconcile buyer, titleholder and financing borrower.
Document use and any genuine rental arrangement.
Evaluate asset transfers before moving depreciation between returns.

The mistake that changes the result

Duplicating the asset in both companies' depreciation schedules can create two deductions for one acquisition.

Records that resolve the question

Purchase invoice.
Title and loan.
Insurance.
Usage and intercompany agreements.

The decision to document

Request a single ownership and tax-basis record with matching entries in each company. Review any proposed lease charges separately from the original purchase and avoid retroactive documents that misstate what occurred.

Which fact changes the answer?

Temporary use, a genuine lease and a permanent transfer are different arrangements. Record which one the parties intend. Insurance and lender restrictions may also constrain the options, so the tax entry should follow an arrangement the businesses can actually implement.

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Sources and scope

General educational information prepared with AI assistance. No individual professional review is represented. Apply the relevant tax-year rules to the actual records. Editorial policy · AI disclosure.

Company A bought equipment that Company B uses. Who depreciates it?