Marian Wilson - Page 16




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          4.  Election To Expense Certain Depreciable Business Assets                 
          Pursuant to Section 179                                                     
               On its 1993 Form 1120S, U.S. Income Tax Return for an S                
          Corporation, Special O elected to expense $10,570 pursuant to               
          section 179.  The business assets in question consisted of                  
          computer equipment.  During the 1993 tax year, Special O reported           
          an ordinary loss from trade or business activities in the amount            
          of $40,791.  Special O did not claim depreciation for any assets            
          placed in service during the 1993 tax year.                                 
               Section 179 allows a taxpayer to make an election to expense           
          up to $17,500 of the cost, or portion thereof, of section 179               
          property for the taxable year in which the property is placed in            
          service.  The election, once made, is irrevocable unless the                
          revocation is consented to by the Commissioner.  See sec. 1.179-            
          5, Income Tax Regs.  Additionally, the amount allowed a taxpayer            
          as a deduction under section 179 cannot exceed the aggregate                
          amount of taxable income of the taxpayer for such taxable year              
          which is derived from the active conduct of any trade or business           
          during such taxable year.  See sec. 179(b)(3)(A).  A taxpayer may           
          carry over a deduction disallowed under section 179(b)(3)(A) to             
          another taxable year.  See sec. 179(b)(3)(B).                               
               We find that Special O is not entitled to a section 179                
          deduction for the 1993 tax year.  Special O had no taxable income           
          for the tax year in issue and so would not be able to avail                 
          itself of the benefit of a section 179 expense deduction.  Since            





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