Discussion:NOL deduction before Section 179 deduction?
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Discussion Forum Index --> Tax Questions --> NOL deduction before Section 179 deduction?
| 14 November 2006 | |
| Client has NOL carryforward of $24k and has elected $105k Section 179 deduction. Pro Series is deducting the NOL carryforward ahead of the Section 179 deduction. Anyone know if this is correct? (Probably is, but it surprised me, since the Sect 179 is a current period deduction which is being limited based on the carryforward). | |
Death&Taxes (talk|edits) said: | 14 November 2006 |
| Taxable Income for 179 purposes is computed without regard to the cost of the qualified expense property, the deduction for one-half of SE Tax, any net operating loss carryforward or backward and any deduction suspended under other code sections. Reg. 1.179-2(c)(1), or so says my Federal tax handbook. | |
| 14 November 2006 | |
| NOL carryforward is for limited number of years, Section 179 carryforward is forever. Do you think that's why? | |
| 14 November 2006 | |
| I am using FAM (Intuit's Fixed Asset Manager) to calculate depreciation. After importing the depreciation into Pro Series, the software is correctly calculating Form 4562, Line 11, "Business Income Limitation" and allowing the correct amount of Section 179 to flow and showing zero for the NOL deduction. But when I manually enter COGS depreciation on Schedule A, Line 5 (debit COGS depreciation) and then manually enter an amount on Form 1120, Line 20b, "Less depreciation claimed on Schedule A and elsewhere on the return", (credit operating expense depreciation) the Form 4562 Line 11 amount changes to zero, eliminating the allowed Section 179 for the current year with the result that the NOL flows instead. I called Tech Support and was told the answer is to check off the box in the asset entry worksheet to identify certain assets as being COGS assets.
But since I have hundreds of assets I am dealing with, I don't want to do this fix through Pro Series. So I went back into FAM and identified all COGS assets and reimported them to Pro Series. The result is sort of correct. At least the Form 4562 line 11 is now calculated correctly. But the problem is that since not all of the Section 179 depreciation was taken, I had allocated the disallowed amount pro rata between the operating depreciation and the COGS depreciation. Pro Series, however, has taken the full COGS regular and 179 depreciation on Schedule A with the offset taken on Form 1120 Line 20b, resulting in a net credit to depreciation expense on Line 20c of -45409. I finally fixed the problem by overriding the Schedule A COGS Sect179, Form 4562, Line 11 and Form 1120, Line 20b. I hate overriding stuff though because I am never certain my override here won't cause something to go sideways somewhere where I am unaware. | |
