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election to include the three assets that were recharacterized as
depreciable.
Discussion
Petitioner made a section 179 election, in conjunction with
his original 1995 return, to expense the cost of a depreciable
business asset. The expense could not be utilized in the 1995
year because the asset was used in a business activity that
reported a loss for the 1995 year. See sec. 179(b)(3)(A). After
examination, respondent reclassified three assets as depreciable
business assets and made other adjustments, which collectively
resulted in 1995 taxable income for petitioner’s business. For
the 1995 tax year, petitioner had classified the three assets as
“materials” or “supplies” and reduced income by their cost. In
response to respondent’s determination, petitioner sought
respondent’s consent to modify his original section 179 election
by adding the three reclassified depreciable business assets.
With respondent’s consent, petitioner would be able to offset the
profit determined by respondent. Respondent declined
petitioner’s request for consent to revoke or modify the original
election. Petitioner contends that it was respondent’s
reclassification of the assets that triggered the availability or
possibility of treating them as section 179 expenses and that he
should be entitled to add those assets to his election.
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Last modified: May 25, 2011