Tax Guide

 Search  2024 Tax Guide  Tax Tools
 Tax Calendar  Tax Glossary

< Previous Page Next Page >

Sharing the Section 179 Deduction

Allocation rules determine how the benefits of the expensing deduction are to be split up between spouses, certain related corporations, partnerships and their partners, and S corporations and their shareholders. These rules are designed to make sure that a purchase of business equipment in a particular year cannot be used by related parties to gain more than the total allowed for expense deductions.

Example

Example

In 2013, Sam Smith and Linda Lane form a partnership to operate a bakery. The partnership buys new ovens for a total cost of $130,000. In addition, Lane also enters into a separate business venture, a flower shop, by herself, for which she buys $5,000 worth of equipment.

Assuming the partnership has taxable income that exceeds $130,000, it can elect to expense up to $130,000 of the cost of the ovens. If it does so, each partner's share of the expensing deduction is $65,000. In addition, Lane can elect to expense the entire $5,000 cost of her equipment, assuming her taxable income derived from the flower shop exceeds $5,000.


< Previous Page Next Page >

© 2024 Wolters Kluwer. All Rights Reserved.