Q:

Subject: Section 179

Hi Ken,

Can you tell me if a sailboat put into charter or as a rental qualifies for section 179 deductions.  I have inherited a large sum of money of which some is taxable.  I read that aquistion of property through inhertance does not qualify, but in fact I could use other monies to purchase the boat.  I need to find a way to write off up to 140K, can you help me?

Thanks in advance,

 A:

Paul:

If you are going to be providing services along with the rental of the boat, its purchase should qualify for the Section 179 expensing election, which is up to $105,000 for 2005 purchases. 

Where the money comes from for the purchase doesn't affect the Section 179 deduction.  As I've mentioned several times before, the deduction is the same whether the asset is paid for with cash or financed completely with a loan. 

What you may be referring to is the limit on the Section 179 deduction to your taxable income.   In most cases, this limit does include income from other trades and businesses, including W-2 wages, in addition to the one for which the asset was acquired.  Depending on what kind of income is being passed through to you via the estate, it may or may not raise that eligible deduction.   Any Sec. 179 amount that can't be claimed for the current year because of this limit can be carried forward to the next year's tax return via Form 4562.

When dealing with large amounts of money, you would be well advised to consult with a tax pro who can give you more specific advice based on your circumstances.   There are also ways to double the potential Sec. 179 deduction with the use of a C Corporation, which you should discuss with your personal tax advisor.

Good luck.

Kerry Kerstetter

Labels: 179

- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 3/02/2005 01:40:00 PM Send this post: