Discussion:Qualifying Section 179 property
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DR BRISKET (talk|edits) said: | 15 February 2006 |
| I think I know the answer to this question, but I would like to get some other input. I have a new client who started a carpentry refinishing business in August of last year. He had a few expensive tools and pieces of equipment that he had purchased somewhere in the past that he began using in his business. I know the basis of such assets is the lower of his acquisition cost or the current market value. My question is: I don't think these assets qualify for Section 179 treatment. Don't such assets have to actually be acquired by purchase after the business has started up? If this is true, then won't the above assets have to be depreciated under MACRS rules? Thanks for any help offered here. | |
| 16 February 2006 | |
| The deduction is allowed for the year in which the property is placed in service.
Property is placed in service when it is placed in a condition or state of readiness and available for a specifically assigned function, in a trade or business, for the production of income, in a tax-exempt activity, or in a personal activity. Reg. Section 1.179-4(e). My thoughts are if he had this equipment before, had never used it it in a trade or business, then should be able to take the 179 now. If he had used the equipment for business in some prior year, I think you are out of luck. | |
| 16 February 2006 | |
| This is from Quickfinder 1040: The Section 179 election must be made in the first-year property is purchased and placed in service. The election does not apply to property converted from personal to business use unless the property was also purchased in the same year. [Reg. §1.179-4(e)]LJACPA 07:43, 16 February 2006 (CST) | |
DR BRISKET (talk|edits) said: | 16 February 2006 |
| Thanks for the clarification. This is what I suspected. And, this is okay because the business will not show much of a taxable profit this year anyway. | |
| 12 September 2008 | |
| Funny how I ask myself these questions again, and here I find my own post from two years ago. IRC section 179 states can be taken on assets "placed in service". I do not find where the code section states it must be purchased in the same year. Quickfinder 1040 does state election must be made in first year property is "purchsed and placed in service". But I would go with the code section.
I have a client who purchased a SUV in November of 2006, but did not actually start using it in his business until February of 2007. Should he not be able to take the section 179 for the tax year 2007? | |
RoyDaleOne (talk|edits) said: | 12 September 2008 |
| Note, conversion from personal to business you get no Sec 179. | |
| 12 September 2008 | |
| This is from the regulations and states "temporary" but it does say "..purchased and placed in service..."
Sec. 1.179-4T Definitions (temporary)
The following definitions apply for purposes of section 179, §§1.179–1 through 1.179–6, and §1.179–2T, 5T, and 6T: (a) Section 179 property. The term section 179 property means any tangible property described in section 179(d)(1) that is acquired by purchase for use in the active conduct of the taxpayer's trade or business (as described in §1.179–2(c)(6)). For taxable years beginning after 2002 and before 2006, the term section 179 property includes computer software described in section 179(d)(1) that is placed in service by the taxpayer in a taxable year beginning after 2002 and before 2006 and is acquired by purchase for use in the active conduct of the taxpayer's trade or business (as described in §1.179–2(c)(6)). For purposes of this paragraph (a), the term trade or business has the same meaning as in section 162 and the regulations thereunder. (b) through (f) [Reserved] For further guidance, see §1.179–4(b) through (f). [T.D. 9146, 69 FR 46984, Aug. 4, 2004] Retrieved from "http://www.taxalmanac.org/index.php/Treasury_Regulations%2C_Subchapter_A%2C_Sec._1.179-4T" | |
RoyDaleOne (talk|edits) said: | 12 September 2008 |
| (e) PLACED IN SERVICE. The term "placed in service" means the time that
property is first placed by the taxpayer in a condition or state of readiness and availability for a specifically assigned function, whether for use in a trade or business, for the production of income, in a tax-exempt activity, or in a personal activity. See Section 1.46-3(d)(2) for examples regarding when property shall be considered in a condition or state of readiness and availability for a specifically assigned function.
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| 14 September 2008 | |
| The placed in service year and the year of purchase need not be the same year. However, it appears that the SUV was not purchased for use in the active conduct of a trade or business. Instead, it was purchased for personal use, then converted to business use. | |
