I have been advised that multiple corporations owned by the same person or up to the same five persons, will be considered a controlled group and will be taxed as a one large corporation. Tax wise, they would be limited to only one Section 179 expenses election and there net income would be grouped together for tax purposes. Would you be so kind to help me understand this matter a little better.

You are correct that among a group of C corps, the $100,000 Sec. 179 must be allocated.

My comment was meant to contrast with the use of pass through entities, such as S-corps, where the net effect is to limit the total combined Sec. 179 deduction to $100,000 on the 1040. A majority of my clients have closely held C corps, where the corp can claim up to $100,000 and they can also claim another $100,000 on their 1040s. If they had used an S corp or 1065 LLC, their total Sec. 179 would be only $100,000. This in effect allows a doubled maximum amount ($200,000).

I still see too many people jumping into S corps without considering the fact that C corps can reduce their taxes dramatically over an S.

I do occasionally speak with a client who thinks he can do even better by setting up several C corps and claiming $100,000 on each of their 1120s. When I explain the limit of one $100,000 to be spread among all of the controlled corps, they drop that idea.

I hope this clears up any confusion.

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 9/26/2003 06:57:00 PM Send this post: