Q:

Subject: Section 179 question

Hello Kerry,

I just came across your website and noted that you respond to questions posed to you via Email.  I too have such a question and hope you have a simple answer:

I was hoping to purchase a printing business for ~$60,000 before the end of 2006 and expense it under Section 179.  It appears, however, that the transaction will not complete prior to mid-January 2007.  Am I correct in understanding that I will not be able to take the Section 179 deduction for 2006?  Any workarounds?

Do appreciate your response.

Best regards and Happy Holidays.

A:

For your individual income taxes, you are correct that anything not purchased and placed into service until 2007 may not be expensed on your 2006 1040. 

You really need to be working directly with a tax professional because there are a lot of very important issues that need to be addressed, such as:

Only certain kinds of business assets may be expensed under Section 179.  Depending on how much of your purchase price is allocated to movable equipment, the full price may not be eligible.  Any costs allocated to such normal parts of a business purchase as real estate, inventory, leaseholds, goodwill and covenants not to compete, are not qualifying property for Section 179.

You should also discuss with a professional tax advisor the feasibility of using a corporation to buy and operate the business.  For example, a C corp could select a fiscal year that would actually allow the Section 179 deduction at an earlier time than waiting for your 2007 1040.

As I said, there are a lot of critical issues to consider; and trying to make such important decisions without the assistance of an experienced tax professional is tantamount to fiscal suicide before you even start your business operations.

Good luck.

Kerry Kerstetter

Follow-Up:

Kerry,

 

I am impressed with your prompt response - to someone out of the blue! 

Thank you - and wish you a super successful 2007.

 

 

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 12/31/2006 01:53:00 PM Send this post: