Discussion:Section 179 Expensing

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Discussion Forum Index --> Tax Questions --> Section 179 Expensing

Jntaxmaster (talk|edits) said:

26 April 2006
If a taxpayer spends $18,000 to have a computer network system installed, is the installation portion of the cost eligible for Sect 179?

Warren (talk|edits) said:

26 April 2006
Yes

Dennis (talk|edits) said:

26 April 2006
caveat. if no customized software is involved.

Jdugancpa (talk|edits) said:

26 April 2006
Even if customized software were included, the entire amount can still be expensed. Customized software may either be capitalized (in which case it would not be eligible for Sec 179) or expensed currently (in which case it would still not be part of the 179 election, which is even better, if you are bumping up against the Sec 179 limit). See the post earlier today regarding software depreciation. I think the reference is RevProc 2000-50 for the authority to expense the customized software.

Dennis (talk|edits) said:

26 April 2006
You sure? 2000-50 specifically does not apply to software "external to the computer's operation" (which could happen in a network) and I think also software subject to ยง197.

Jdugancpa (talk|edits) said:

26 April 2006
Dennis, I don't know what software "external to the computer's operations" could possibly mean. I think you have misread the RevProc. It states "PROCEDURES external to the computer's operations."

"Computer software does not include any data or information base described in section 1.197-2(b)(4) of the Income Tax Regulations (for example, data files, customer lists, or client files) unless the data base or item is in the public domain and is incidental to a computer program. Nor does it include any cost of procedures that are external to the computer's operation."

As to Sec197, software would only be a Sec 197 intangible if it were acquired in an business acquisition. See 197(e)(3).

Dennis (talk|edits) said:

26 April 2006
All sorts of protocols in network application. Some external. I'm not disagreeing, but $18K for installation is a big number in the wireless age. Has to include something.

Jdugancpa (talk|edits) said:

26 April 2006
$18K is a relative number. It would be big for networking my office, but it might be peanuts for networking a larger company.

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