[y_u_no_pass]

There seems to be some common knowledge at my firm that I cannot personally find any basis for. For anyone who works with section 179 and the carryovers due to an income limitation:

Can the carryover be deducted as soon as the company has income, assuming it is within the 179 limitation for that tax year?

Example:

A partnership purchases a piece of equipment of $500,000 in 2013 and elects to expense all $500,000 with section 179. They only have $250,000 of income and therefore a carryover of $250,000. In 2014, the partnership does not place any new assets into service, and they have $500,000 of income. Do they get to take the $250,000 carryover as a deduction in 2014?

Florida CPA!
Took final exam 2/25/15.
Sent in Application 3/12/15.
Issued License 3/20/15.
Used CPA Excel solely for all exams.

[taxgeek83]

That's always been my understanding, though there seems to be a caveat for 2014 as it relates to qualified real property….

https://www.irs.gov/publications/p946/ch02.html#en_US_2013_publink1000299339

[y_u_no_pass]

Thanks taxgeek! This is personal property, so that rule doesn't apply.

Florida CPA!
Took final exam 2/25/15.
Sent in Application 3/12/15.
Issued License 3/20/15.
Used CPA Excel solely for all exams.

[taxgeek83]

No problem! I feel like depreciation schedules have been my life lately. 🙂

P.S. Congrats on the recent license!! 🙂

[ibCPAsoon]

Generally speaking – yes….but as always with tax it depends.

The partnership flows into the individuals partners returns – so it also depends on their individual situation if they will get to take the loss. Section 179 deductions are specifically separated on the K-1 (For partnership – Box 12) for this reason – whereas regular depreciation is not.

BEC - PASS JULY 2014
FAR - PASS DEC 2014
AUD - PASS FEB 2015
REG - PASS MAY 2015

[taxgeek83]

@ib – You're right. However, assuming the partnership doesn't have the business income limitation issue, the deduction should be allowed at the entity level. It could still be suspended at the partner level, depending on the partners' specific tax situations.

[Author]

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