Tax Guru – Ker$tetter Letter

Q:

Subject: Sale of sec 179

 

Is the below comment true (specifically the ‘not subject to the self-employment tax’)? I want to know the penalties of a Section 179 that I made for 2005 for $32,000 and a business truck.

“If a taxpayer disposes of property on which the taxpayer has claimed the Section 179 deduction, the Section 179 deduction is subject to recapture in the same manner as depreciation. A taxpayer reports the sale of such property on Form 4797. The recapture of depreciation and the recapture of the Section 179 deduction on a sale of the property are not subject to the self-employment tax (Section 1402(a)(3)(C)).”

Found on the web here.

A:

That is true; but it nothing new.  Gains from sales of business equipment, including depreciation recapture, have always been reported on Form 4797, which is not counted as self employment income.  Section 179 is really just a form of very accelerated depreciation.

Your personal professional tax advisor can explain how this affects you in more detail.

Good luck.

Kerry Kerstetter