John Karason - Page 10




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          amounts.  Petitioner also produced 2001 personal bank account               
          statements for an account with Auto Worker’s Credit Union in the            
          name of his mother, Marie J. Vignovich, and on which petitioner             
          had signatory authority.  Petitioner did not provide any                    
          documentation with respect to the medical equipment.                        
                                       OPINION                                        
          I.   Medical Equipment                                                      
               Petitioner contends he purchased the medical equipment from            
          Dr. Karason in 2001 and leased it back to KCPI in 2001 along with           
          other medical equipment as part of his medical equipment rental             
          business.  Thus, he asserts he is entitled to expense $24,000 of            
          the cost of the medical equipment purchased in 2001 pursuant to             
          section 179 and depreciate the remaining amount pursuant to                 
          section 167, and that he is entitled to section 167 depreciation            
          deductions for previously purchased medical equipment.                      
               Section 179 allows a taxpayer to elect to treat the cost of            
          section 179 property as a current expense in the year such                  
          property is placed in service, within certain dollar limitations.           
          Sec. 179(a) and (b).  To substantiate this expense, the taxpayer            
          must maintain records which specifically identify each item of              
          section 179 property and reflect how and from whom such property            
          was acquired and when such property was placed in service.  See             
          sec. 1.179-5(a), Income Tax Regs.  Section 179 property is                  
          defined as property acquired by purchase for use in the active              







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