New Bus sect 179...what would you do?

[AZ-Tax]

My client purchased an existing business in 2007 did not pay SE tax in during the year and will have Fed, State & SE tax to pay unless I Sect 179 all of the 1245 assets purchased in 2007. I have received post that lean towards sect 179 and others do not use sect 179.

[Bees Knees]

What's the question? Shouldn't the decision be your client's?

[BHoffman]

Depends

You cannot use Sec 179 if your client purchased the STOCK in an existing business. In that case, the bases of the assets carry over. The only amount of Sec 179 available to him in this case would be for new assets he purchased.

You can use Sec 179 if your client purchased the ASSETS of an existing business. These should be listed in the sale/purchase agreement at FMV and you have to file form 8594 - which must agree with the seller's tax form 8594.

The sale/purchase agreement is important. I always get a copy for my files.

[ChEAr$]

purchase of business/assets

My client purchased an existing business in 2007 did not pay SE tax in during the year and will have Fed, State & SE tax to pay unless I Sect 179 all of the 1245 assets purchased in 2007. I have received post that lean towards sect 179 and others do not use sect 179.

As others pointed out, section 179 only works with purchase of assets and not stock.

Therefore, you just gotta do the math and make a projection of income/expenses over
a time horizon of about 5 years (my favorite time). Then do projected tax returns for
same period of time and use present value analysis to figure out best course of action.