Tax Guru – Ker$tetter Letter

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Archive for April 9th, 2007

Posted by taxguru on April 9, 2007

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Making everyone equal

Posted by taxguru on April 9, 2007

A staple of the drive-by media are stories about the horror of income and wealth inequality. Underlying these tales of how terrible our society is for allowing such disparities is the only solution, central government confiscation and redistribution. I hope it’s not necessary to remind folks where this concept originated (thank your Karl Marx).

I was very surprised to see this analogy in a comic from the Arkansas Democrat’s political cartoonist:


(Click on image for full size)

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Not everything in tax law is explicitly stated…

Posted by taxguru on April 9, 2007

Q:

Subject: Section 179-Are assets used in commercial rentals eligible for the Section 179 deduction?
 
Good Afternoon TaxGuru,
 
TurboTax allows me to take a Section 179 deduction for tangible, personal-property assets used in my commercial rental activity.  It does not allow this treatment for residential rentals. 
 
Here’s my problem.  I can’t find anything in Publication 946 to support TurboTax’s position, but find it difficult to believe that this huge company could make such an error.
 
My accountant says I can’t take the Section 179 deduction; TurboTax says I can.  Would you please steer me to the relevant IRS regulations and rulings? 
Perhaps you could add it to your online article about the Section 179.
 
Thank you kindly.

A:

You are approaching this bit of research into the Section 179 law from the wrong perspective if you expect it to specifically spell out every single possible type of asset that would qualify for first year expensing.  That isn’t how most laws are written.

It’s been almost 35 years since I took Business Law in college, so I don’t remember the specific legal term; but I do recall the concept that most laws allow certain things in a broad sense and any exclusions from that coverage are required to be specifically stated. In other words, if a law says movable business equipment can be expensed in the first year, we start from the premise that this includes everything.  Then, the law and regulations specify certain things that are not to be covered by this law.

As you have most likely already seen, most descriptions of ineligible property include the following:
   “Used predominantly to furnish lodging or in connection with the furnishing of lodging (with the exception of hotel/motel operations).”

If the law were intended to rule out property used in any kind of rental activity, it would say so and not make the very definite distinction of only mentioning lodging (aka residential).  By only mentioning that kind of rental activity, it allows us to operate under the assumption that otherwise eligible property used in any other kind of rental activity would not be ineligible.

There is also the fact that, for as long as the Section 179 deduction has been in existence, landlords of commercial properties have been claiming it for many kinds of equipment used in conjunction with those rentals and IRS has not had any problems.  Many of my clients are commercial landlords and I frequently use Section 179 on those rental schedules, and IRS has never once disallowed it.

I realize this may not be as detailed an answer as you were hoping for; but it’s the best I can come up with during this heavy crunch time.

I hope it helped you understand this issue a little better.

Good luck.

Kerry Kerstetter

 

Follow-Up:

Kerry:
 
Thank you for your excellent advice.  You  answered my question and taught me an entirely-new-way-of thinking.
 
This is an incredible gift.  I will revisit your site regularly to check out your advice and watch for client openings.
 
Thanks again.
 
Your raving fan,

 

 

 

 

Posted in 179 | Comments Off on Not everything in tax law is explicitly stated…

Politickles

Posted by taxguru on April 9, 2007

Every year around this time (Tax Season), F.R. Duplantier graces us with some of his limerick style looks at the fun topic of taxes.

This year’s offerings:

QUESTIONABLE DEDUCTIONS
You expect to have something to show
When you get your first job and some dough;
Then you get your first check
And you say, “What the heck!
Where the hell did the rest of it go?”
 
 
A TAXPAYER’S LAMENT
Of my annual earnings Uncle Sam will extract
Fully two-fifths, as a matter of fact.
That’s quite a large portion, but what’s got me burned:
I’ll never see that much in service returned, ETC.

 

 

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