Tax Guru – Ker$tetter Letter

Q:

Subject: Yet another Section 179 Q

Hi Kerry,

Sure appreciate your blog and I thank you in advance for any insight you can provide.

A friend of mine started an LLC this year with another partner/member.  They wrote a note for this “Asset Purchase” and acquired mostly computer equipment, which happens to be the total assets they’ll start with at the newly formed LLC.  They purchased the computer equipment from the same company they used to work for and would have been “rightsized” out the door from if they had not agreed to this “opportunity”.

 Would these computers qualify as Section 179 property so long as they only attempt to deduct up to $105K in year 2005?

 Thank you,

A:

As long as they didn’t have an ownership interest in the previous owner of the equipment, it should qualify for possible Section 179 expensing.

The actual amount of the Section 179 deduction that can be claimed will depend on the amount of income the LLC has.  It can’t be used to create a net loss.
 
Your friends should be working with their own professional tax advisor to make sure they handle the LLC properly rather than rely on second hand information.  There are dozens of ways in which they can screw things up if they try to handle things on their own.

Kerry Kerstetter