Section 179 Depreciation

[cynamoats]

I am having a brain lapse because I typically don't need to worry about the Taxable Income Limitations and Section 179 depreciation. But, I have a client who has no taxable income but is a shareholder in another s corp with an individual who wants me to section 179 depreciation on equipment purchased during 05. My client does not need the extra depreciation but obviously the other client is use to his accountant taking section 179 depreciation and offsetting their taxable income.

Question, if before taking Section 179 depreciation the s corp is showing a $ 10,000 profit, is it possible to take $ 50,000 section 179 depreciation? And, since my client doesn't need it, is there a carryover of this unused depreciation, other than a NOL, to the next year?

Thank you for any comments to put my head on straight.

[Matt Sova]

179 Limit

179 is limited at the entity level first, so in that case they could take 179 up to 10k.

[rosieea]

179 is limited at the entity level first, so in that case they could take 179 up to 10k.

Don't forget that S-Corp employee-shareholder salaries are an add back when determining the 179 limit at the Corp level. Also, if the deduction is limited at the shareholder level, the amount of excess cannot be carried forward[ ] and a basis reduction occurs anyway [double ] Such being the case, I would advise your client of the consequences and let him arm wrestle with the other shareholder before you do anything.