26 U.S.C. § 179 : US Code - Section 179: Election to expense certain depreciable business assets

Search 26 U.S.C. § 179 : US Code - Section 179: Election to expense certain depreciable business assets

(a) Treatment as expenses
A taxpayer may elect to treat the cost of any section 179
property as an expense which is not chargeable to capital account.
Any cost so treated shall be allowed as a deduction for the taxable
year in which the section 179 property is placed in service.
(b) Limitations
(1) Dollar limitation
The aggregate cost which may be taken into account under
subsection (a) for any taxable year shall not exceed $25,000
($100,000 in the case of taxable years beginning after 2002 and
before 2008).
(2) Reduction in limitation
The limitation under paragraph (1) for any taxable year shall
be reduced (but not below zero) by the amount by which the cost
of section 179 property placed in service during such taxable
year exceeds $200,000 ($400,000 in the case of taxable years
beginning after 2002 and before 2008).
(3) Limitation based on income from trade or business
(A) In general
The amount allowed as a deduction under subsection (a) for
any taxable year (determined after the application of
paragraphs (1) and (2)) shall not exceed the aggregate amount
of taxable income of the taxpayer for such taxable year which
is derived from the active conduct by the taxpayer of any trade
or business during such taxable year.
(B) Carryover of disallowed deduction
The amount allowable as a deduction under subsection (a) for
any taxable year shall be increased by the lesser of -
(i) the aggregate amount disallowed under subparagraph (A)
for all prior taxable years (to the extent not previously
allowed as a deduction by reason of this subparagraph), or
(ii) the excess (if any) of -
(I) the limitation of paragraphs (1) and (2) (or if
lesser, the aggregate amount of taxable income referred to
in subparagraph (A)), over
(II) the amount allowable as a deduction under subsection
(a) for such taxable year without regard to this
subparagraph.
(C) Computation of taxable income
For purposes of this paragraph, taxable income derived from
the conduct of a trade or business shall be computed without
regard to the deduction allowable under this section.
(4) Married individuals filing separately
In the case of a husband and wife filing separate returns for
the taxable year -
(A) such individuals shall be treated as 1 taxpayer for
purposes of paragraphs (1) and (2), and
(B) unless such individuals elect otherwise, 50 percent of
the cost which may be taken into account under subsection (a)
for such taxable year (before application of paragraph (3))
shall be allocated to each such individual.
(5) Inflation adjustments
(A) In general
In the case of any taxable year beginning in a calendar year
after 2003 and before 2008, the $100,000 and $400,000 amounts
in paragraphs (1) and (2) shall each be increased by an amount
equal to -
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section
1(f)(3) for the calendar year in which the taxable year
begins, by substituting "calendar year 2002" for "calendar
year 1992" in subparagraph (B) thereof.
(B) Rounding
(i) Dollar limitation
If the amount in paragraph (1) as increased under
subparagraph (A) is not a multiple of $1,000, such amount
shall be rounded to the nearest multiple of $1,000.
(ii) Phaseout amount
If the amount in paragraph (2) as increased under
subparagraph (A) is not a multiple of $10,000, such amount
shall be rounded to the nearest multiple of $10,000.
(6) Limitation on cost taken into account for certain passenger
vehicles
(A) In general
The cost of any sport utility vehicle for any taxable year
which may be taken into account under this section shall not
exceed $25,000.
(B) Sport utility vehicle
For purposes of subparagraph (A) -
(i) In general
The term "sport utility vehicle" means any 4-wheeled
vehicle -
(I) which is primarily designed or which can be used to
carry passengers over public streets, roads, or highways
(except any vehicle operated exclusively on a rail or
rails),
(II) which is not subject to section 280F, and
(III) which is rated at not more than 14,000 pounds gross
vehicle weight.
(ii) Certain vehicles excluded
Such term does not include any vehicle which -
(I) is designed to have a seating capacity of more than 9
persons behind the driver's seat,
(II) is equipped with a cargo area of at least 6 feet in
interior length which is an open area or is designed for
use as an open area but is enclosed by a cap and is not
readily accessible directly from the passenger compartment,
or
(III) has an integral enclosure, fully enclosing the
driver compartment and load carrying device, does not have
seating rearward of the driver's seat, and has no body
section protruding more than 30 inches ahead of the leading
edge of the windshield.
(c) Election
(1) In general
An election under this section for any taxable year shall -
(A) specify the items of section 179 property to which the
election applies and the portion of the cost of each of such
items which is to be taken into account under subsection (a),
and
(B) be made on the taxpayer's return of the tax imposed by
this chapter for the taxable year.
Such election shall be made in such manner as the Secretary may
by regulations prescribe.
(2) Election irrevocable
Any election made under this section, and any specification
contained in any such election, may not be revoked except with
the consent of the Secretary. Any such election or specification
with respect to any taxable year beginning after 2002 and before
2008 may be revoked by the taxpayer with respect to any property,
and such revocation, once made, shall be irrevocable.
(d) Definitions and special rules
(1) Section 179 property
For purposes of this section, the term "section 179 property"
means property -
(A) which is -
(i) tangible property (to which section 168 applies), or
(ii) computer software (as defined in section 197(e)(3)(B))
which is described in section 197(e)(3)(A)(i), to which
section 167 applies, and which is placed in service in a
taxable year beginning after 2002 and before 2008,
(B) which is section 1245 property (as defined in section
1245(a)(3)), and
(C) which is acquired by purchase for use in the active
conduct of a trade or business.
Such term shall not include any property described in section
50(b) and shall not include air conditioning or heating units.
(2) Purchase defined
For purposes of paragraph (1), the term "purchase" means any
acquisition of property, but only if -
(A) the property is not acquired from a person whose
relationship to the person acquiring it would result in the
disallowance of losses under section 267 or 707(b) (but, in
applying section 267(b) and (c) for purposes of this section,
paragraph (4) of section 267(c) shall be treated as providing
that the family of an individual shall include only his spouse,
ancestors, and lineal descendants),
(B) the property is not acquired by one component member of a
controlled group from another component member of the same
controlled group, and
(C) the basis of the property in the hands of the person
acquiring it is not determined -
(i) in whole or in part by reference to the adjusted basis
of such property in the hands of the person from whom
acquired, or
(ii) under section 1014(a) (relating to property acquired
from a decedent).
(3) Cost
For purposes of this section, the cost of property does not
include so much of the basis of such property as is determined by
reference to the basis of other property held at any time by the
person acquiring such property.
(4) Section not to apply to estates and trusts
This section shall not apply to estates and trusts.
(5) Section not to apply to certain noncorporate lessors
This section shall not apply to any section 179 property which
is purchased by a person who is not a corporation and with
respect to which such person is the lessor unless -
(A) the property subject to the lease has been manufactured
or produced by the lessor, or
(B) the term of the lease (taking into account options to
renew) is less than 50 percent of the class life of the
property (as defined in section 168(i)(1)), and for the period
consisting of the first 12 months after the date on which the
property is transferred to the lessee the sum of the deductions
with respect to such property which are allowable to the lessor
solely by reason of section 162 (other than rents and
reimbursed amounts with respect to such property) exceeds 15
percent of the rental income produced by such property.
(6) Dollar limitation of controlled group
For purposes of subsection (b) of this section -
(A) all component members of a controlled group shall be
treated as one taxpayer, and
(B) the Secretary shall apportion the dollar limitation
contained in subsection (b)(1) among the component members of
such controlled group in such manner as he shall by regulations
prescribe.
(7) Controlled group defined
For purposes of paragraphs (2) and (6), the term "controlled
group" has the meaning assigned to it by section 1563(a), except
that, for such purposes, the phrase "more than 50 percent" shall
be substituted for the phrase "at least 80 percent" each place it
appears in section 1563(a)(1).
(8) Treatment of partnerships and S corporations
In the case of a partnership, the limitations of subsection (b)
shall apply with respect to the partnership and with respect to
each partner. A similar rule shall apply in the case of an S
corporation and its shareholders.
(9) Coordination with section 38
No credit shall be allowed under section 38 with respect to any
amount for which a deduction is allowed under subsection (a).
(10) Recapture in certain cases
The Secretary shall, by regulations, provide for recapturing
the benefit under any deduction allowable under subsection (a)
with respect to any property which is not used predominantly in a
trade or business at any time.