1. Election to expense certain depreciable business assets

2. Basic Concept…
Taxpayer may elect to treat the cost of an
asset as an expense rather than
depreciate it over the life of the asset
S179(a)

3. But must consider:
Who?
What?
When?
How much?

4. WHO?
 Easier to say who can NOT take it
○ S1.179-1(a)
 Special rule for MFS
 Each party assigned cost.
 Can elect out
 Limitations and reductions.
○ S179(b)(4)

5. WHAT?
 Section 179 property*
 Tangible
 Computer Software
○ Subject to sec 167 and 197
○ Placed in service 2002-2014
 Section 1245 property
 Acquired by purchase for use in active conduct of a
trade or business
 NOT property in Sec 50 (b)
 No a/c or heating units
*subject to limitations
S179(d)(1)(A), (B), and (C)

6. Sec 50, 167, 197 & 1245?
 As refers to computer software:
○ S197(e) (3)(B)
○ S167(a)
 As refers to Sec 1245 property
○ S1245(a)(3)(A) and (B) all
 As refers to Sec 50 property
○ S50(b)all

7. WHEN?
 Any cost so treated shall be allowed as
a deduction for the taxable year in which
the section 179 property is placed in
service.
○ S179(a)
 The property must be purchased by the
Tax Payer
○ S179(d)2

8. HOW MUCH?
 The deduction allowed in any taxable
year cannot exceed the income of
taxpayer. The amount may carryover to
subsequent tax years
○ S179(b)(3)(A) and (B)
 Computation of taxable income shall be
computed without regard to the
deduction allowable under this section
○ S179(b)(3)(C )

9. HOW MUCH?
 Assets are subject to limitations*
○ S179(b)(1)
 2007-2009 $250,000
 2010-2013 $200,000
 2014+ $25,000
 Limits will be reduced (to not less then zero) if cost of
asset exceeds:
○ S179(b)(2)all
 2007-2009 $800,000
 2010-2013 $2,000,000
 2014+ $200,000
 Limits on controlled groups
*special rules for SUVs

10. HOW MUCH?
 SUVs
 Travel over roads
 Ceiling
 Not subject to sec 280F
○ Limit on depreciation
 Gross weight
 Some vehicles excluded based on:
 Number of people
 Cargo bed
S179(b)(5)(B)
S280F(a)(1)(A)

11. Disaster Relief
 Special rules for qualified disasters
○ S179(e) (1) & (2)
 In a federal declared disaster area
○ S168(n)(2)

12. Difficult Choice
 Revocation possible but difficult
○ S179(c )

13. Douglas TC Memo 2011-
214
 IRS denied S179 expense for airplane
 Husband argued used for Business
 Unable to substantiate
 Used for personal use
 Didn’t satisfy IRC or Regs
 Idle asset rule
 Used CPA advice
 Less penalty

14. Karason TC Memo 2007-
103
 Claimed Sec 179 for medical equipment
 Unable to prove actual purchase
 Lines blurry because not arms length
transaction

15. Kimmelman, 72 TC 294
 Partner in 5 different partnerships
 Invested in unprofitable vineyards
 Held for resale and rented out
 Elected Sec 179 expense for grapevines
 Used for experimental transplant
program