Michael H. Visin and Natalie Marselly - Page 12

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          certain records regarding each piece of section 179 property.               
               The Commissioner has published Form 4562, Part I of which is           
          entitled “Election To Expense Certain Tangible Property (Section            
          179)”, and, as its title suggests, is intended for a taxpayer’s             
          use in making the election to expense section 179 property.                 
               Petitioners did not attach to their 1998 income tax return a           
          Form 4562, nor did they unequivocally elect on their return to              
          expense the cost of the computer equipment and software under               
          section 179.  On the other hand, petitioners did include the cost           
          of that property as a component of cost of goods sold.  However,            
          we are not inclined to regard the inclusion of property in cost             
          of goods sold as the equivalent of an election under section 179.           
          See Patton v. Commissioner, 116 T.C. 206 (2001); McGrath v.                 
          Commissioner, T.C. Memo. 2002-231; Starr v. Commissioner, T.C.              
          Memo. 1995-190 (“Entitlement to the benefits of section 179 is              
          not automatic.  It requires an affirmative election be attached             
          to the original return or to a timely filed amended return.”),              
          affd. without published opinion 99 F.3d 1146 (9th Cir. 1996).  In           
          any event, we observe that the matter is without any tax effect             
          in 1998 under the facts of the present case.  In other words, to            
          the extent that petitioners are denied an expensing deduction               
          under section 179, they will be entitled to an increase, on a pro           
          tanto basis, in the amount of their home office deduction under             
          section 280A because the limitation imposed by section 280A(c)(5)           

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