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Petitioner contends that respondent was unreasonable in not
giving consent because, as petitioner further contends,
respondent was the catalyst for petitioner’s need to modify
(revoke) his section 179 election. Petitioner’s
characterization, however, ignores significant factual
predicates. First, petitioner, in reporting for his 1995 tax
years, classified the three assets as materials and supplies so
as to reduce income by the assets’ cost in the year of
acquisition. For the 1995 year, petitioner reported a loss in
the business activity in which the assets were used.
Accordingly, petitioner could not, under section 179, expense
rather than depreciate those assets. See sec. 179(b)(3). That
appears to be the reason why petitioner attempted to classify and
report depreciable assets as “materials” or “supplies” and to
reduce income by the entire cost of the asset. Petitioner does
not argue that respondent’s classification of the three assets as
depreciable property was incorrect or in error. Instead,
petitioner wants to “capitalize” on his initial misclassification
by reducing taxable income caused by the unreported receipts
discovered by respondent. In this setting, we do not see
respondent as precipitating petitioner’s request for consent to
revoke. Instead it was petitioner’s mischaracterization that
precipitated the need for change.
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