tax planning or something else?

[dmj4]

If a Sch C or F client buys depreciable assets and expenses them; he saves income and SE tax. If he uses and keeps those assets a couple of years and resells them, he only has to pay back income tax. Does anyone know of anything IRS has that would make this troublesome. It seems to me that if it is done on a regular basis, the "intent" would be to underpay SE tax. However, with IRS there are many things allowed that seem wrong to me. One quick example is allowing Section 179 to increase EIC.

I have farm accounts that will have additional SE income this year due to the tobacco buyout, if they are the producer. Many of them are planning to buy equipment to offset the income and SE tax.

Any other examples of "tax planning or something else" issues any of you have?

[Mark Goldberg]

OK with me

I know of nothing wrong with using section 179 and then selling the asset two years later with the effect of saving some SE tax.

[Gene V]

sale of business asset

While attending a seminar years ago, I remember the instructor said if you sell assets from your business (like Sch. C or F) that you report the sales back on Sch. C or F.
I know the instruction for sale of business assets goes on form 4797, just not sure how you would report the sales back to the original schedule that you use to deduct it from.

[dmj4]

I don't

I report on 4797 and recapture the depreciation.

I have never heard anything about taking it back to Sch C or Sch F.

[jainen]

nothing wrong

If business use drops to 50% or less, recapture goes back to Sch. C/F. However, on a disposition Section 1245 rules take precedence. Section 1.179-1(e)(3) says, "If section 1245(a) applies to a disposition of property, there is no recapture...." I see nothing wrong with tax planning around this or any other provision of the code.

[Gene V]

50% business

If business use drops to 50% or less, recapture goes back to Sch. C/F

Thanks Jainen, that must have been what they were talking about.
QF 10-12 confirms your quote.