- 9 -
not for profit activities) speaks in terms of "an individual or
an S corporation", but, when a partnership is involved, the so-
called for profit analysis focuses on the partnership and not the
individual. See Fox v. Commissioner, 80 T.C. 972, 1006 (1983),
affd. without published opinion 742 F.2d 1441 (2d Cir. 1984),
affd. sub nom. Barnard v. Commissioner, 731 F.2d 230 (4th Cir.
1984). In this regard, it should be noted that the election in
section 179(a) is phrased in terms of a "taxpayer may elect".
Surely petitioners would not contend that an election may not be
made for property in a business conducted by a partnership. For
purposes of section 179(b)(3)(A), a partnership is a taxpayer.
It becomes apparent then that petitioners' dissatisfaction
is not with the regulation per se, but rather with the
incorporation of the section 179(b)(3)(A) limitation in section
179(d)(8). Thus, if we were to hold for petitioners, we would
have to read the section 179(b)(3)(A) limitation out of section
179(d)(8). This we cannot do. Section 179(d)(8) specifically
states: "In the case of a partnership, the limitations of
subsection (b)" apply to the partnership and the partners. It
does not say that only subsection (b)(1) and (2) shall apply. See
Green v. Commissioner, T.C. Memo. 1998-356 (applying section
179(b)(3)(A) to an "S" corporation).
At trial petitioners also seemed to argue that the term
"taxable income" as used in section 179(b)(3)(A) should be
interpreted to mean gross receipts of the trade or business
carried on as a partnership. This argument has no basis in law.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 Next
Last modified: May 25, 2011