Q:

Subject: SECTION 179 QUESTION / PARTNERSHIP

 

I'm not quite sure how to post a question to your blog, so email was the best way I could find.  I have a 2 person LLC taxed as a partnership.  I have W2 income from a previous job in 2006 of $85,000.  The LLC's profit for the year is $10,000.  The capital account of each of the 2 members is $41,000.  I have equipment that I bought for this LLC during 2006 worth $84,000 that I would like expense using section 179.  Is the section 179 expensing limited to my $10,000 in business profit or can I pass it through to my W2 (married filing jointly) to offset the W2 income of $85,000.

 

Thanks,

A:

This is the kind of thing that you need to be discussing with your personal professional tax advisor because it can basically play out two different ways, depending on a key factor that wasn't very clear in your email.

If the equipment was purchased by the LLC and set up on its books, any Section 179 deduction would be limited by the LLC's income before even showing up on the K-1s for the owners.

If you purchased the equipment in your personal name to be used on behalf of the LLC, you would be entitled to a much higher Section 179 deduction based on your other W-2 earned income and the other owner would receive no part of that deduction, unless it's your wife.

If maximum deduction was important, how to purchase the equipment should actually have been discussed with your personal professional tax advisor before buying it. 

If, as it seems, you have been trying to navigate your way through the operation of an LLC without benefit of the guidance of a professional tax advisor, you need to start working with one immediately.

Good luck.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/24/2007 05:55:00 PM Send this post: