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a total loss of $38,829. As part of the 1995 return, petitioner
elected to expense a plasma torch under section 179 in the amount
of $4,100. At the time petitioner filed his 1995 return, he was
unable to deduct the $4,100 section 179 expense because of the
reported business loss.
In connection with the examination of petitioner’s 1995
return, respondent reconstructed petitioner’s income by means of
a bank deposit analysis. The analysis resulted in respondent’s
determination that petitioner failed to report $135,638 of gross
receipts from the welding business on Schedule C. Petitioner
reduced income by classifying as “materials and supplies” the
following items: (1) Miller 450 amp reach; (2) extended reach
feeder; and (3) Webb turning roller. Respondent determined that
these were capital assets that should have been depreciated as
tangible business property as follows:
Elected Date placed Cost recovery
Item cost into service period
(1) Miller 450 amp reach $7,500 Feb. 1995 5 years
(2) Extended reach feeder 3,200 Aug. 1995 7 years
(3) Webb turning roller 2,700 Apr. 1995 5 years
As a result of respondent’s determinations, petitioner’s
welding business would have a profit in excess of $17,500 instead
of a loss. Petitioner sought respondent’s consent to revoke,
amend, or modify his section 179 election so as to expense the
three assets respondent determined were depreciable. Respondent
denied petitioner’s request to modify his original section 179
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Last modified: May 25, 2011