Hello to all,
A local tax preparer unexpectedly passed away a few months ago, and I have received several clients from this sad event. His returns are hand written, and the late preparer has done a couple of things I just want to run by you.
In all the returns I received, the preparer has taken Section 179 expenses only (no depreciation). However, he may NOT take the S179 in the year of purchase, or he make take a little bit in the year of purchase, none the next year, and then the balance in the third year. (There was income left in the return each of these years, and he would show the remaining basis in the asset as a S179 "carry forward" in later years) The client explained that the preparer told them he could save the S179 expensing for what years helped them the most.
I have never seen this before, and have always thought you could take S179 (within limits) only in the year of purchase, and depreciate the balance (if any) over the appropriate recovery period. No skipping years, and no picking S179 dollar amounts after the year of purchase.
How would you handle this on the new client's 2007 return?
The other item I would like to run by you is a situation where the taxpayer bought and sold pipe. (Oil Field). The taxpayer claims he has the pipe sold before he buys it. For example through his contacts he learns that "Buyer" is looking for some pipe and is willing to pay $X. The taxpayer then finds the pipe for less than $X at "Seller" and moves the pipe from "Seller" to "Buyer" and keeps the profit. This happened in the three returns I looked at (2004, 2005 & 2006). Each time this was reported on form 4797 Part II "Ordinary Gains and Losses"
This seems to me it should be showing on Schedule "C" and self employment taxes being paid. Any thoughts?
Thank You.....Marie