UHY LLP News Alert - S Corps Not Subject to Controlled Group Section 179 Limitations

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S Corps Not Subject to Controlled Group Section 179 Limitations

The IRS has released Information Letter 2013-0016 in which it concluded that even though an S corporation (S corp) may be included in a controlled group, the S corp will not be considered a member of the controlled group for the rules that control the maximum Section 179 deduction that may be taken by the controlled group on an annual basis. For purposes of the maximum Section 179 deduction, component members of a controlled group are considered one taxpayer. Therefore, the members, in aggregate, are subject to Section 179 deduction and limitations as if they were a single taxpayer. Since S corporations are not component members of controlled groups, the aggregation rule does not apply. Thus, an S corp included in a control group is considered a separate entity for the Section 179 limitations and permitted an election up to the maximum amount.

Note: For 2013, the maximum Section 179 deduction that may be taken by a taxpayer is $500,000, subject to phase out limitations. The maximum deduction is reduced if the taxpayer places qualifying property in service in excess of $2,000,000 with the deduction totally phased out with qualifying acquisitions of $2,500,000 or more. In addition, the amount of allowable Section 179 expense is further limited by the amount of taxable income from the trade or business.

It is important to remember that although S corporations are not subject to the controlled group limitations for Section 179, there are still limitations applied at the shareholder level.

For more information or questions on this topic, please contact your professional at UHY LLP in Farmington Hills 248 355 1040 or Sterling Heights 586 254 1040 or visit us on the web at http://www.uhy-us.com.

Published by UHY LLP News.
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Shannon Gnesda
UHY LLP
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