Discussion:Income limitations for Section 179 in S Corp
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Discussion Forum Index --> Advanced Tax Questions --> Income limitations for Section 179 in S Corp
Discussion Forum Index --> Tax Questions --> Income limitations for Section 179 in S Corp
| 1 July 2009 | |
| I am a bit nervous about adding back the salary of shareholders to "increase income" so that I am able to apply Section 179 to the bottom line. In doing so, I will end up with a loss up to the salary amount, (in this case $199,000). According to page 23 of Pub 946, "However do not take in account any tax-exempt income, the section 179 deduction, and deductions for compensation paid to shareholder-employees. For purposes of determining the total amount of the S corp items, treat deductions and losses as negative income."
I even discussed this extensively with the IRS and they agreed, (shareholders salary is a means of removing some of their investments from the company), but still would like to get some reassurance from anyone out there that has used Section 179 under these circumstances. Please note that the property does qualify in all other limitations of section 179. | |
| 1 July 2009 | |
| you are allowed to take the section 179 to reduce income to zero, then you may take additional section 179 up to the amount of shareholder wages.
Most tax programs will have a line under/near the wage line where you can input shareholder wages. This allows for the proper calculation of section 179 expense. | |
| 3 July 2009 | |
| You are allowed to add back the shareholder salary in the computaion of the 179 deduction.
However, the 179 deduction can't cause a loss in net income. If it does when you compute it, you have to use regular depreciation. | |
