Discussion:Sec 179 depr for sole prop
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Discussion Forum Index --> Basic Tax Questions --> Sec 179 depr for sole prop
Discussion Forum Index --> Tax Questions --> Sec 179 depr for sole prop
| 10 April 2008 | |
| Have a sole prop client who went into business by purchasing a vending route for $100k. The price includes ownership of about 45 vending machines. Can he claim Sec. 179 for the FMV of the machine (about $1,000 each), even if the business does not have a $45k profit? Keep in mind his wife has W-2 income that, when added to the mix, generates an overall positive amount of income......here's the scenario....
Revenues = $100k Expenses (excluding Sec. 179 depr) = 75k Sec 179 = $45k Wife's W-2 = $60k Can the Sec. 179 be claimed since the overall cash inflow on Form 1040 ($100k + $60k) is greater than the outflow ($75k + $45k Sec. 179). Thanks. | |
| 10 April 2008 | |
| Sorry, Let me present this with better formatting......
Have a sole prop client who went into business by purchasing a vending route for $100k. The price includes ownership of about 45 vending machines. Can he claim Sec. 179 for the FMV of the machine (about $1,000 each), even if the business does not have a $45k profit? Keep in mind his wife has W-2 income that, when added to the mix, generates an overall positive amount of income......here's the scenario.... Revenues = $100k; Expenses (excluding Sec. 179 depr) = 75k; Sec 179 = $45k; Wife's W-2 = $60k; Can the Sec. 179 be claimed since the overall cash inflow on Form 1040 ($100k + $60k) is greater than the outflow ($75k + $45k Sec. 179). Thanks. | |
| 11 April 2008 | |
| No you cannot use the W-2 wages of wife, since the business is owned by the husband, only the income from the business is taken into account for the amount of sec 179 allowed. | |
| 11 April 2008 | |
| You can only deduct sec 179 up to the amount of net income on the sch C. Your example:
Revenue 100K Expenses 75K Income before sec 179 25K Sec 179 45K Net income after 179 0 Carry forward of sec 179 20K | |
| 2008-04-11 | |
| Discussion:Section 179 limitations | |
| 11 April 2008 | |
| Thanks all. Seems like a tie here. But thanks for the link to the prior thread Sw. The only question now remains is...can the wife's W-2 count towards the Sec. 179 calculation? | |
| 11 April 2008 | |
| No, the wife's w-2 cannot count towards sec 179, she is not an owner. | |
| 11 April 2008 | |
| Can you show me the regs that specifically state that the non sch c w-2 cannot be used against 179?
I've been offsetting W-2 income for years with Sec 179. If I am doing it incorrectly, please show me the way. | |
| 11 April 2008 | |
| You can offset the income, just no use it as a basis for sec 179. For example, A S Corp with 50,000 in net income, 50,000 w-2 for shareholder, then 100,000 sec 179 can be used. In the case above, Sch C does not have w-2 for owners, and wife is not an owner, if it is joint ownership, they need to file 2 sch Cs or file a partnership return, etc... | |
| 11 April 2008 | |
| Nate,
That is not what I asked. You stated that if a Sch C has Section 179 expense and that expense reduces the Sch C income to below 0, that that excess Section 179 expense cannot be used to offset the non owner spouse's W-2 and thereby reduce total overall taxable income. I do not believe that to be correct, but, I may be mistaken. I would like you to show me specifically where it states that this cannot be done? I am not talking Sub S Corp, I am talking Sch C. S-Corps and 1065's are different returns and different regs apply. Specifically Sch C. | |
| 11 April 2008 | |
| Fred I'm with you. I think that the all business and trade related income(including W2's) figures into the calculation. | |
| 11 April 2008 | |
| Thanks Derek. No disrespect to Nate, but sometimes people say things here and they say them emphatically as if that's the law. Unless I know it's the law unequivocally, I usually throw in an I believe.
I understand stating a position, but once someone questions and requests the reg, don't just respout what you said before. Either cite the authoritative document or say that that was what you thought. Simple enough to me. | |
Seaside CPA (talk|edits) said: | 11 April 2008 |
| I agree with Fred. If a joint return is filed, the taxable incomes of both spouses are aggregated, even though the Section 179 deduction may be related to the activities of only one spouse. [Reg. 1.179-2(c)(7)]. | |
Death&Taxes (talk|edits) said: | 11 April 2008 |
| I carry a sign for Fred too; this has been basic taxes since 179 was put into the law. Yes there are limits when you involve pass through entities, but not on a Sch C. | |
| 11 April 2008 | |
| You know, the problem with these forums is that someone states something different from what I know and I begin to question myself. I sometimes forget that I actually know everything. :-) | |
| 11 April 2008 | |
| Thanks guys. And Nate, don't take it the wrong way. I see from your profile that, and you are relatively young from a tax prep standpoint. I've been doing it about 20 years <almost 1/3 of the amount that DT has> and these people teach me new stuff every day.
And Natalie, not even gonna add any other comments <EG> | |
| 11 April 2008 | |
| It was, and you were correct. They can take the Sec 179. I was talking about being more elaborate when another person questions your answer. | |
