Section 179 help for 2003 return

I'm filing 2003 taxes and have a refund coming (long story, I have had several major surgeries and rehab from 2002 to

2006, but an incompetent CPA has left me in this spot).

2001 taxes were filed w/ $6050 refund applied toward future taxes. 2002 taxes are not done yet, but I was eligible for a refund of approx $ 7-9K - had I not missed the 3 year deadline.

I have a small computer consulting business and had W2 income as well from 1998 to 2003.

I'm confused about the section 179 deduction and the special depreciation allowance. I bought a qualifying truck 12-31-2002 (over 6,000 lbs). I am going to take the sec 179 deduction in 2003, the year the truck was put into service. I've read several articles and IRS pub 463,

946, and 3991 - a May 2002 supplement.

I read SOMEWHERE (or dreamed it) that you had to put the vehicle in service, and take the 179 deduction, and purchase the vehicle all in the same tax year. I haven't been able to find that statement again, so I'm hoping some of you will be able to clarify that for me.

Unfortunately, since I've fired my CPA that lost my 2002 refund, I'm struggling to complete the small business portion of my tax return. I don't have a copy of any tax software for 2003, so I'm using TurboTax 2004 to give me a little help on filling out these schedules.

Thanks for any help.

Cathy

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Reply to
Ckbeme
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Oh, boy. That is not the answer I wanted to hear, but thanks for your response. Not to argue with someone who is more knowledgeable, but can you tell me what pub (and the section/area of the pub) gives a statement to that effect? When I reviewed instructions today the only thing I found pertained to the Special Depreciation Allowance. It stated that the special depreciation allowance had to be taken on a timely filed return. So I bet you're going to tell me that neither can be deductions on a late return... What a large gift I've given to the IRS, 2 years running.

Ck

Reply to
Ckbeme
Reply to
Harlan Lunsford

The regulations make it clear that a valid section 179 election *can* be made on a late-filed return. Here's what the regs say: "The election under section 179 and 1.179-1 to claim a section 179 expense deduction for section 179 property shall be made on the taxpayer's first income tax return for the taxable year to which the election applies (whether or not the return is timely) or on an amended return filed within the time prescribed by law (including extensions) for filing the return for such taxable year."

Reply to
LoTax

Actually it looks like Mike's not correct. Treasury Regulation 1.179-5 says, "The election under section 179 and 26 C.F.R. § 1.179-1 to claim a section 179 expense deduction for section 179 property shall be made on the taxpayer's first income tax return for the taxable year to which the election applies (whether or not the return is timely) or on an amended return filed within the time prescribed by law (including extensions) for filing the return for such taxable year." Note the operative terms: the election "shall be made on the taxpayer's first income tax return for the taxable year ... (whether or not the return is timely)...." There is no restriction in section 179 that requires the election to be taken on a return that is filed timely. Stu

Reply to
Stuart A. Bronstein
Reply to
Harlan Lunsford

I have a client who regularly files a year or more late, usually when Franchise Tax Board threatens to garnish his wife's wages. He had taken to filing their return with mortgage interest and property tax and charitable contributions only, omitting his Sch. C . We tried to claim

179 on some items he put into service on the amended return to claim Sch. C income and deductions. It was denied and he was forced to depreciate the items . On those returns where he filed late (beyond the extension due date) with a 179 deduction, it was allowed. Linda Dorfmont E.A., CFP, CSA
Reply to
DORFMONT
[Ck breathes 5 or 6 sighs of relief....]

Thanks so much to ALL of you for your replies - and the referenced quotes as well. I know it took some time to find that specific regulation, section and paragraph.

I had about decided to take the 179 and just hope it was allowed. It's a pretty significant deduction and I need all the help I can get this year.

I have a related question I'll throw in here, but will probably need to post a new topic to get a response.

Is timely filing required to be eligible for the Special Depreciation Allowance? I understand that it is supposed to be taken in the first year that the item is put in service. But what if your return is late?

This is similar to the 179 deduction; it's difficult to find all-inclusive concrete rules in one publication. I've read so much about both subjects that they have blended into a large gray mass.

Thanks again,

Cathy

Reply to
Ckbeme

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