I recently received another question about the Section 179 expensing election that should be useful in clarifying some of its technical applications for the benefit of the many other tax pros who read this.

The question:

I have been advised that multiple corporations owned by the same person or up to the same five persons, will be considered a controlled group and will be taxed as a one large corporation. Tax wise, they would be limited to only one Section 179 expenses election and there net income would be grouped together for tax purposes. Would you be so kind to help me understand this matter a little better.

My response:

You are correct that among a group of C corps, the $100,000 Sec. 179 must be allocated.

My comment was meant to contrast with the use of pass through entities, such as S-corps, where the net effect is to limit the total combined Sec. 179 deduction to $100,000 on the 1040. A majority of my clients have closely held C corps, where the corp can claim up to $100,000 and they can also claim another $100,000 on their 1040s. If they had used an S corp or 1065 LLC, their total Sec. 179 would be only $100,000. This in effect allows a doubled maximum amount ($200,000).

I still see too many people jumping into S corps without considering the fact that C corps can reduce their taxes dramatically over an S.

I do occasionally speak with a client who thinks he can do even better by setting up several C corps and claiming $100,000 on each of their 1120s. When I explain the limit of one $100,000 to be spread among all of the controlled corps, they drop that idea.

I hope this clears up any confusion.

Dian Brown sells property – More on the lingering fallout from the looting and collapse of Harrison Abstract.

We have discovered that Ms. Brown wasn’t just fast and loose with the escrow funds. She was very loose on how to handle 1031 exchanges. Sherry’s company, Tax Free Exchange Corporation, has had to recently bail out a number of former clients of Ms. Brown’s who are in the middle of doing 1031 exchanges. While we weren’t surprised that she had copied her documents from ours, as many others in this area have, we have been appalled at how terrible her application of the rules for 1031 exchanges had been. We are having to educate her former clients on the proper 1031 procedures, as if they had never heard of it, even though many claim to have done 1031s with Dian Brown. They need to keep their fingers crossed that their tax returns aren’t examined by IRS, because their sloppy “1031” exchanges won’t stand up to much close scrutiny.