Capitalize or expense equipment >1y <$100

The above seem like office supplies to me.

Slow down there. The equipment he buys for his business is not necessarily listed property because of how you read that phrase "generally used for entertainment, recreation, or amusement". That would relate to say, a party boat used by a company to entertain clients and execs. Not a DJ who is out trying to make a living (or at least a profit) from his trade or business of DJ'ing, which equipment is a vital part of generating that income. People and businesses in the entertainment industry don't have to "list" every asset they have because they're in the entertainment business.

The cables I'd expense out as supplies. The lights, depends on the specifics. I've seen some pretty expensive lighting rigs. The lamps (light bulbs) I'd expense though as supplies. The actual lighting fixture.......depends on the cost. A small light over the sound board would be expensed as supplies. A $1000+ lighting system to make the room look cool.....capitalized. Section 179 is always an option and on the safer side of a tax audit.

First, let's be clear about something - there is NO FORMAL provision in the IRC for a de minimus exception to capitalizing items with a useful life of more than one year regardless of cost. It simply does not exist. BUT as a practical matter the IRS unofficially lets a lot of stuff slide - who wants to track and 89cent staple puller over 5, 7 10 or 40 years?

The case on point for this is Hospital Corp of America v. Commissioner. They adopted "a de minimus expensing policy" and wrote off everything as supplies that was individually under a certain dollar amount. The problem was that this policy equated to something like 65% of their income in each of two years. The IRS had a real problem with this and reacted as anticipated.

You can expense some amount, but the amount cannot unreasonably skew your income. There's also been some reverse issues where large companies have capitalized low cost items because spreading the cost over 5, 7, 10 or 40 years had INFLATED their net income and made them look stronger than they really were.

This is one of those areas where the experience and judgment of a tax professional come into play. I have clients that we capitalize everything that costs more than $50, for others its' $100. Many years ago I had a very large construction company will very expensive equipment that averaged hundreds of thousands of dollars each, their policy was to expense anything that cost less $5,000 and I recommended they reduce that to just $1,000.

The right answer is based on knowledge of the industry and experience in the field. If you have both you know what will fly, if not - go see a pro, at least to get an opinion you can base your decisions on.

Gene E. Utterback, EA, RFC, ABA