---
kind: "range"
citation: "26 C.F.R. §§ 1.179-1–1.179-6"
title: "26"
from: "1.179-1"
to: "1.179-6"
count: 6
url: "https://uscodex.org/cfr/26/1.179-1..1.179-6"
---

# §1.179-1. Election to expense certain depreciable assets.

- (a) **In general.** [Section 179(a)](/cfr/26/179.md?p=a) allows a taxpayer to elect to expense the cost (as defined in [§ 1.179-4(d)](/cfr/26/1.179-4.md?p=d)), or a portion of the cost, of [section 179](/cfr/26/179.md) property (as defined in [§ 1.179-4(a)](/cfr/26/1.179-4.md?p=a)) for the taxable year in which the property is placed in service (as defined in [§ 1.179-4(e)](/cfr/26/1.179-4.md?p=e)). The election is not available for trusts, estates, and certain noncorporate lessors. See [paragraph (i)(2)](#i-2) of this section for rules concerning noncorporate lessors. However, [section 179(b)](/cfr/26/179.md?p=b) provides certain limitations on the amount that a taxpayer may elect to expense in any one taxable year. See §§ [1.179-2](/cfr/26/1.179-2.md) and [1.179-3](/cfr/26/1.179-3.md) for rules relating to the dollar and taxable income limitations and the carryover of disallowed deduction rules. For rules describing the time and manner of making an election under [section 179](/cfr/26/179.md), see [§ 1.179-5](/cfr/26/1.179-5.md). For the effective date, see [§ 1.179-6](/cfr/26/1.179-6.md).
- (b) **Cost subject to expense.** The expense deduction under [section 179](/cfr/26/179.md) is allowed for the entire cost or a portion of the cost of one or more items of [section 179](/cfr/26/179.md) property. This expense deduction is subject to the limitations of [section 179(b)](/cfr/26/179.md?p=b) and [§ 1.179-2](/cfr/26/1.179-2.md). The taxpayer may select the properties that are subject to the election as well as the portion of each property's cost to expense.
- (c) **Proration not required—**
  - (1) **In general.** The expense deduction under [section 179](/cfr/26/179.md) is determined without any proration based on—
    - (i) The period of time the [section 179](/cfr/26/179.md) property has been in service during the taxable year; or
    - (ii) **The length of the taxable year in which the property is placed in service.**
  - (2) **Example.** The following example illustrates the provisions of [paragraph (c)(1)](#c-1) of this section.
- (d) **Partial business use—**
  - (1) **In general.** If a taxpayer uses [section 179](/cfr/26/179.md) property for trade or business as well as other purposes, the portion of the cost of the property attributable to the trade or business use is eligible for expensing under [section 179](/cfr/26/179.md) provided that more than 50 percent of the property's use in the taxable year is for trade or business purposes. The limitations of section179(b) and [§ 1.179-2](/cfr/26/1.179-2.md) are applied to the portion of the cost attributable to the trade or business use.
  - (2) **Example.** The following example illustrates the provisions of [paragraph (d)(1)](#d-1) of this section.
  - (3) **Additional rules that may apply.** If a [section 179](/cfr/26/179.md) election is made for “listed property” within the meaning of [section 280F(d)(4)](/cfr/26/280F.md?p=d-4) and there is personal use of the property, [section 280F(d)(1)](/cfr/26/280F.md?p=d-1), which provides rules that coordinate [section 179](/cfr/26/179.md) with the [section 280F](/cfr/26/280F.md) limitation on the amount of depreciation, may apply. If [section 179](/cfr/26/179.md) property is no longer predominantly used in the taxpayer's trade or business, [paragraphs (e)](#e) (1) through (4) of this section, relating to recapture of the [section 179](/cfr/26/179.md) deduction, may apply.
- (e) **Change in use; recapture—**
  - (1) **In general.** If a taxpayer's [section 179](/cfr/26/179.md) property is not used predominantly in a trade or business of the taxpayer at any time before the end of the property's recovery period, the taxpayer must recapture in the taxable year in which the [section 179](/cfr/26/179.md) property is not used predominantly in a trade or business any benefit derived from expensing such property. The benefit derived from expensing the property is equal to the excess of the amount expensed under this section over the total amount that would have been allowable for prior taxable years and the taxable year of recapture as a deduction under [section 168](/cfr/26/168.md) (had [section 179](/cfr/26/179.md) not been elected) for the portion of the cost of the property to which the expensing relates (regardless of whether such excess reduced the taxpayer's tax liability). For purposes of the preceding sentence (i) the “amount expensed under this section” shall not include any amount that was not allowed as a deduction to a taxpayer because the taxpayer's aggregate amount of allowable [section 179](/cfr/26/179.md) expenses exceeded the [section 179(b)](/cfr/26/179.md?p=b) dollar limitation, and (ii) in the case of an individual who does not elect to itemize deductions under [section 63(g)](/cfr/26/63.md?p=g) in the taxable year of recapture, the amount allowable as a deduction under [section 168](/cfr/26/168.md) in the taxable year of recapture shall be determined by treating property used in the production of income other than rents or royalties as being property used for personal purposes. The amount to be recaptured shall be treated as ordinary income for the taxable year in which the property is no longer used predominantly in a trade or business of the taxpayer. For taxable years following the year of recapture, the taxpayer's deductions under [section 1688(a)](/cfr/26/1688.md?p=a) shall be determined as if no [section 179](/cfr/26/179.md) election with respect to the property had been made. However, see [section 280F(d)(1)](/cfr/26/280F.md?p=d-1) relating to the coordination of [section 179](/cfr/26/179.md) with the limitation on the amount of depreciation for luxury automobiles and where certain property is used for personal purposes. If the recapture rules of both [section 280F(b)(2)](/cfr/26/280F.md?p=b-2) and this [paragraph (e)(1)](#e-1) apply to an item of [section 179](/cfr/26/179.md) property, the amount of recapture for such property shall be determined only under the rules of [section 280F(b)(2)](/cfr/26/280F.md?p=b-2).
  - (2) **Predominant use.** Property will be treated as not used predominantly in a trade or business of the taxpayer if 50 percent or more of the use of such property during any taxable year within the recapture period is for a use other than in a trade or business of the taxpayer. If during any taxable year of the recapture period the taxpayer disposes of the property (other than in a disposition to which [section 1245(a)](/cfr/26/1245.md?p=a) applies) or ceases to use the property in a trade or business in a manner that had the taxpayer claimed a credit under [section 38](/cfr/26/38.md) for such property such disposition or cessation in use would cause recapture under [section 47](/cfr/26/47.md), the property will be treated as not used in a trade or business of the taxpayer. However, for purposes of applying the recapture rules of [section 47](/cfr/26/47.md) pursuant to the preceding sentence, converting the use of the property from use in trade or business to use in the production of income will be treated as a conversion to personal use.
  - (3) **Basis; application with section 1245.** The basis of property with respect to which there is recapture under [paragraph (e)(1)](#e-1) of this section shall be increased immediately before the event resulting in such recapture by the amount recaptured. If [section 1245(a)](/cfr/26/1245.md?p=a) applies to a disposition of property, there is no recapture under [paragraph (e)(1)](#e-1) of this section.
  - (4) **Carryover of disallowed deduction.** See [§ 1.179-3](/cfr/26/1.179-3.md) for rules on applying the recapture provisions of this [paragraph (e)](#e) when a taxpayer has a carryover of disallowed deduction.
  - (5) **Example.** The following example illustrates the provisions of [paragraphs (e)(1) through (e)(4)](#e-1..e-4) of this section.
- (f) **Basis—**
  - (1) **In general.** A taxpayer who elects to expense under [section 179](/cfr/26/179.md) must reduce the depreciable basis of the [section 179](/cfr/26/179.md) property by the amount of the [section 179](/cfr/26/179.md) expense deduction.
  - (2) **Special rules for partnerships and S corporations.** Generally, the basis of a partnership or S corporation's [section 179](/cfr/26/179.md) property must be reduced to reflect the amount of [section 179](/cfr/26/179.md) expense elected by the partnership or S corporation. This reduction must be made in the basis of partnership or S corporation property even if the limitations of [section 179(b)](/cfr/26/179.md?p=b) and [§ 1.179-2](/cfr/26/1.179-2.md) prevent a partner in a partnership or a shareholder in an S corporation from deducting all or a portion of the amount of the [section 179](/cfr/26/179.md) expense allocated by the partnership or S corporation. See [§ 1.179-3](/cfr/26/1.179-3.md) for rules on applying the basis provisions of this [paragraph (f)](#f) when a person has a carryover of disallowed deduction.
  - (3) **Special rules with respect to trusts and estates which are partners or S corporation shareholders.** Since the [section 179](/cfr/26/179.md) election is not available for trusts or estates, a partner or S corporation shareholder that is a trust or estate may not deduct its allocable share of the [section 179](/cfr/26/179.md) expense elected by the partnership or S corporation. The partnership or S corporation's basis in [section 179](/cfr/26/179.md) property shall not be reduced to reflect any portion of the [section 179](/cfr/26/179.md) expense that is allocable to the trust or estate. Accordingly, the partnership or S corporation may claim a depreciation deduction under [section 168](/cfr/26/168.md) or a [section 38](/cfr/26/38.md) credit (if available) with respect to any depreciable basis resulting from the trust or estate's inability to claim its allocable portion of the [section 179](/cfr/26/179.md) expense.
- (g) **Disallowance of the section 38 credit.** If a taxpayer elects to expense under [section 179](/cfr/26/179.md), no [section 38](/cfr/26/38.md) credit is allowable for the portion of the cost expensed. In addition, no [section 38](/cfr/26/38.md) credit shall be allowed under [section 48(d)](/cfr/26/48.md?p=d) to a lessee of property for the portion of the cost of the property that the lessor expensed under [section 179](/cfr/26/179.md).
- (h) **Partnerships and S corporations—**
  - (1) **In general.** In the case of property purchased and placed in service by a partnership or an S corporation, the determination of whether the property is [section 179](/cfr/26/179.md) property is made at the partnership or S corporation level. The election to expense the cost of [section 179](/cfr/26/179.md) property is made by the partnership or the S corporation. See sections [703(b)](/cfr/26/703.md?p=b), [1363(c)](/cfr/26/1363.md?p=c), [6221](/cfr/26/6221.md), [6231(a)(3)](/cfr/26/6231.md?p=a-3), [6241](/cfr/26/6241.md), and [6245](/cfr/26/6245.md).
  - (2) **Example.** The following example illustrates the provisions of [paragraph (h)(1)](#h-1) of this section.
- (i) **Leasing of section 179 property—**
  - (1) **In general.** A lessor of [section 179](/cfr/26/179.md) property who is treated as the owner of the property for Federal tax purposes will be entitled to the [section 179](/cfr/26/179.md) expense deduction if the requirements of [section 179](/cfr/26/179.md) and the regulations thereunder are met. These requirements will not be met if the lessor merely holds the property for the production of income. For certain leases entered into prior to January 1, 1984, the safe harbor provisions of [section 168(f)(8)](/cfr/26/168.md?p=f-8) apply in determining whether an agreement is treated as a lease for Federal tax purposes.
  - (2) **Noncorporate lessor.** In determining the class of taxpayers (other than an estate or trust) for which [section 179](/cfr/26/179.md) is applicable, [section 179(d)(5)](/cfr/26/179.md?p=d-5) provides that if a taxpayer is a noncorporate lessor (i.e., a person who is not a corporation and is a lessor), the taxpayer shall not be entitled to claim a [section 179](/cfr/26/179.md) expense for [section 179](/cfr/26/179.md) property purchased and leased by the taxpayer unless the taxpayer has satisfied all of the requirements of [section 179(d)(5)](/cfr/26/179.md?p=d-5) (A) or (B).
- (j) **Application of sections 263 and 263A.** Under [section 263(a)(1)(G)](/cfr/26/263.md?p=a-1-G), expenditures for which a deduction is allowed under [section 179](/cfr/26/179.md) and this section are excluded from capitalization under [section 263(a)](/cfr/26/263.md?p=a). Under this [paragraph (j)](#j), amounts allowed as a deduction under [section 179](/cfr/26/179.md) and this section are excluded from the application of the uniform capitalization rules of [section 263A](/cfr/26/263A.md).
- (k) **Cross references.** See [section 453(i)](/cfr/26/453.md?p=i) and the regulations thereunder with respect to installment sales of [section 179](/cfr/26/179.md) property. See [section 1033(g)(3)](/cfr/26/1033.md?p=g-3) and the regulations thereunder relating to condemnation of outdoor advertising displays. See [section 1245(a)](/cfr/26/1245.md?p=a) and the regulations thereunder with respect to recapture rules for [section 179](/cfr/26/179.md) property.

# §1.179-2. Limitations on amount subject to section 179 election.

- (a) **In general.** [Sections 179(b)](/cfr/26/179.md?p=b) (1) and (2) limit the aggregate cost of [section 179](/cfr/26/179.md) property that a taxpayer may elect to expense under [section 179](/cfr/26/179.md) for any one taxable year (dollar limitation). See [paragraph (b)](#b) of this section. [Section 179(b)(3)(A)](/cfr/26/179.md?p=b-3-A) limits the aggregate cost of [section 179](/cfr/26/179.md) property that a taxpayer may deduct in any taxable year (taxable income limitation). See [paragraph (c)](#c) of this section. Any cost that is elected to be expensed but that is not currently deductible because of the taxable income limitation may be carried forward to the next taxable year (carryover of disallowed deduction). See [§ 1.179-3](/cfr/26/1.179-3.md) for rules relating to carryovers of disallowed deductions. See also sections [280F(a)](/cfr/26/280F.md?p=a), [(b)](/cfr/26/280F.md?p=b), and [(d)(1)](/cfr/26/280F.md?p=d-1) relating to the coordination of [section 179](/cfr/26/179.md) with the limitations on the amount of depreciation for luxury automobiles and other listed property. The dollar and taxable income limitations apply to each taxpayer and not to each trade or business in which the taxpayer has an interest.
- (b) **Dollar limitation—**
  - (1) **In general.** The aggregate cost of [section 179](/cfr/26/179.md) property that a taxpayer may elect to expense under [section 179](/cfr/26/179.md) for any taxable year beginning in 2003 and thereafter is $25,000 ($100,000 in the case of taxable years beginning after 2002 and before 2008 under [section 179(b)(1)](/cfr/26/179.md?p=b-1), indexed annually for inflation under [section 179(b)(5)](/cfr/26/179.md?p=b-5) for taxable years beginning after 2003 and before 2008), reduced (but not below zero) by the amount of any excess [section 179](/cfr/26/179.md) property (described in [paragraph (b)(2)](#b-2) of this section) placed in service during the taxable year.
  - (2) **Excess section 179 property.** The amount of any excess [section 179](/cfr/26/179.md) property for a taxable year equals the excess (if any) of—
    - (i) The cost of [section 179](/cfr/26/179.md) property placed in service by the taxpayer in the taxable year; over
    - (ii) $200,000 ($400,000 in the case of taxable years beginning after 2002 and before 2008 under [section 179(b)(2)](/cfr/26/179.md?p=b-2), indexed annually for inflation under [section 179(b)(5)](/cfr/26/179.md?p=b-5) for taxable years beginning after 2003 and before 2008).
  - (3) **Application to partnerships—**
    - (i) **In general.** The dollar limitation of this [paragraph (b)](#b) applies to the partnership as well as to each partner. In applying the dollar limitation to a taxpayer that is a partner in one or more partnerships, the partner's share of [section 179](/cfr/26/179.md) expenses allocated to the partner from each partnership is aggregated with any nonpartnership [section 179](/cfr/26/179.md) expenses of the taxpayer for the taxable year. However, in determining the excess [section 179](/cfr/26/179.md) property placed in service by a partner in a taxable year, the cost of [section 179](/cfr/26/179.md) property placed in service by the partnership is not attributed to any partner.
    - (ii) **Example.** The following example illustrates the provisions of [paragraph (b)(3)(i)](#b-3-i) of this section.
    - (iii) **Partner's share of section 179 expenses.** [Section 704](/cfr/26/704.md) and the regulations thereunder govern the determination of a partner's share of a partnership's [section 179](/cfr/26/179.md) expenses for any taxable year. However, no allocation among partners of the [section 179](/cfr/26/179.md) expenses may be modified after the due date of the partnership return (without regard to extensions of time) for the taxable year for which the election under [section 179](/cfr/26/179.md) is made.
    - (iv) **Taxable year.** If the taxable years of a partner and the partnership do not coincide, then for purposes of [section 179](/cfr/26/179.md), the amount of the partnership's [section 179](/cfr/26/179.md) expenses attributable to a partner for a taxable year is determined under [section 706](/cfr/26/706.md) and the regulations thereunder (generally the partner's distributive share of partnership [section 179](/cfr/26/179.md) expenses for the partnership year that ends with or within the partner's taxable year).
    - (v) **Example.** The following example illustrates the provisions of [paragraph (b)(3)(iv)](#b-3-iv) of this section.
  - (4) **S Corporations.** Rules similar to those contained in [paragraph (b)(3)](#b-3) of this section apply in the case of S corporations (as defined in [section 1361(a)](/cfr/26/1361.md?p=a)) and their shareholders. Each shareholder's share of the [section 179](/cfr/26/179.md) expenses of an S corporation is determined under [section 1366](/cfr/26/1366.md).
  - (5) **Joint returns—**
    - (i) **In General.** A husband and wife who file a joint income tax return under [section 6013(a)](/cfr/26/6013.md?p=a) are treated as one taxpayer in determining the amount of the dollar limitation under [paragraph (b)(1)](#b-1) of this section, regardless of which spouse purchased the property or placed it in service.
    - (ii) **Joint returns filed after separate returns.** In the case of a husband and wife who elect under [section 6013(b)](/cfr/26/6013.md?p=b) to file a joint income tax return for a taxable year after the time prescribed by law for filing the return for such taxable year has expired, the dollar limitation under [paragraph (b)(1)](#b-1) of this section is the lesser of—
      - (A) The dollar limitation (as determined under [paragraph (b)(5)(i)](#b-5-i) of this section); or
      - (B) The aggregate cost of [section 179](/cfr/26/179.md) property elected to be expensed by the husband and wife on their separate returns.
    - (iii) **Example.** The following example illustrates the provisions of [paragraph (b)(5)(ii)](#b-5-ii) of this section.
  - (6) **Married individuals filing separately—**
    - (i) **In general.** In the case of an individual who is married but files a separate income tax return for a taxable year, the dollar limitation of this [paragraph (b)](#b) for such taxable year is the amount that would be determined under [paragraph (b)(5)(i)](#b-5-i) of this section if the individual filed a joint income tax return under [section 6013(a)](/cfr/26/6013.md?p=a) multiplied by either the percentage elected by the individual under this [paragraph (b)(6)](#b-6) or 50 percent. The election in the preceding sentence is made in accordance with the requirements of [section 179(c)](/cfr/26/179.md?p=c) and [§ 1.179-5](/cfr/26/1.179-5.md). However, the amount determined under [paragraph (b)(5)(i)](#b-5-i) of this section must be multiplied by 50 percent if either the individual or the individual's spouse does not elect a percentage under this [paragraph (b)(6)](#b-6) or the sum of the percentages elected by the individual and the individual's spouse does not equal 100 percent. For purposes of this [paragraph (b)(6)](#b-6), marital status is determined under [section 7703](/cfr/26/7703.md) and the regulations thereunder.
    - (ii) **Example.** The following example illustrates the provisions of [paragraph (b)(6)(i)](#b-6-i) of this section.
  - (7) **Component members of a controlled group—**
    - (i) **In general.** Component members of a controlled group (as defined in [§ 1.179-4(f)](/cfr/26/1.179-4.md?p=f)) on December 31 are treated as one taxpayer in applying the dollar limitation of [sections 179(b)](/cfr/26/179.md?p=b) (1) and (2) and this [paragraph (b)](#b). The expense deduction may be taken by any one component member or allocated (for the taxable year of each member that includes that December 31) among the several members in any manner. Any allocation of the expense deduction must be pursuant to an allocation by the common parent corporation if a consolidated return is filed for all component members of the group, or in accordance with an agreement entered into by the members of the group if separate returns are filed. If a consolidated return is filed by some component members of the group and separate returns are filed by other component members, the common parent of the group filing the consolidated return must enter into an agreement with those members that do not join in filing the consolidated return allocating the amount between the group filing the consolidated return and the other component members of the controlled group that do not join in filing the consolidated return. The amount of the expense allocated to any component member, however, may not exceed the cost of [section 179](/cfr/26/179.md) property actually purchased and placed in service by the member in the taxable year. If the component members have different taxable years, the term taxable year in [sections 179(b)](/cfr/26/179.md?p=b) (1) and (2) means the taxable year of the member whose taxable year begins on the earliest date.
    - (ii) **Statement to be filed.** If a consolidated return is filed, the common parent corporation must file a separate statement attached to the income tax return on which the election is made to claim an expense deduction under [section 179](/cfr/26/179.md). See [§ 1.179-5](/cfr/26/1.179-5.md). If separate returns are filed by some or all component members of the group, each component member not included in a consolidated return must file a separate statement attached to the income tax return on which an election is made to claim a deduction under [section 179](/cfr/26/179.md). The statement must include the name, address, employer identification number, and the taxable year of each component member of the controlled group, a copy of the allocation agreement signed by persons duly authorized to act on behalf of the component members, and a description of the manner in which the deduction under [section 179](/cfr/26/179.md) has been divided among the component members.
    - (iii) **Revocation.** If a consolidated return is filed for all component members of the group, an allocation among such members of the expense deduction under [section 179](/cfr/26/179.md) may not be revoked after the due date of the return (including extensions of time) of the common parent corporation for the taxable year for which an election to take an expense deduction is made. If some or all of the component members of the controlled group file separate returns for taxable years including a particular December 31 for which an election to take the expense deduction is made, the allocation as to all members of the group may not be revoked after the due date of the return (including extensions of time) of the component member of the controlled group whose taxable year that includes such December 31 ends on the latest date.
- (c) **Taxable income limitation—**
  - (1) **In general.** The aggregate cost of [section 179](/cfr/26/179.md) property elected to be expensed under [section 179](/cfr/26/179.md) that may be deducted for any taxable year may not exceed the aggregate amount of taxable income of the taxpayer for such taxable year that is derived from the active conduct by the taxpayer of any trade or business during the taxable year. For purposes of [section 179(b)(3)](/cfr/26/179.md?p=b-3) and this [paragraph (c)](#c), the aggregate amount of taxable income derived from the active conduct by an individual, a partnership, or an S corporation of any trade or business is computed by aggregating the net income (or loss) from all of the trades or businesses actively conducted by the individual, partnership, or S corporation during the taxable year. Items of income that are derived from the active conduct of a trade or business include [section 1231](/cfr/26/1231.md) gains (or losses) from the trade or business and interest from working capital of the trade or business. Taxable income derived from the active conduct of a trade or business is computed without regard to the deduction allowable under [section 179](/cfr/26/179.md), any [section 164(f)](/cfr/26/164.md?p=f) deduction, any net operating loss carryback or carryforward, and deductions suspended under any section of the Code. See [paragraph (c)(6)](#c-6) of this section for rules on determining whether a taxpayer is engaged in the active conduct of a trade or business for this purpose.
  - (2) **Application to partnerships and partners—**
    - (i) **In general.** The taxable income limitation of this [paragraph (c)](#c) applies to the partnership as well as to each partner. Thus, the partnership may not allocate to its partners as a [section 179](/cfr/26/179.md) expense deduction for any taxable year more than the partnership's taxable income limitation for that taxable year, and a partner may not deduct as a [section 179](/cfr/26/179.md) expense deduction for any taxable year more than the partner's taxable income limitation for that taxable year.
    - (ii) **Taxable year.** If the taxable year of a partner and the partnership do not coincide, then for purposes of [section 179](/cfr/26/179.md), the amount of the partnership's taxable income attributable to a partner for a taxable year is determined under [section 706](/cfr/26/706.md) and the regulations thereunder (generally the partner's distributive share of partnership taxable income for the partnership year that ends with or within the partner's taxable year).
    - (iii) **Example.** The following example illustrates the provisions of [paragraph (c)(2)(ii)](#c-2-ii) of this section.
    - (iv) **Taxable income of a partnership.** The taxable income (or loss) derived from the active conduct by a partnership of any trade or business is computed by aggregating the net income (or loss) from all of the trades or businesses actively conducted by the partnership during the taxable year. The net income (or loss) from a trade or business actively conducted by the partnership is determined by taking into account the aggregate amount of the partnership's items described in [section 702(a)](/cfr/26/702.md?p=a) (other than credits, tax-exempt income, and guaranteed payments under [section 707(c)](/cfr/26/707.md?p=c)) derived from that trade or business. For purposes of determining the aggregate amount of partnership items, deductions and losses are treated as negative income. Any limitation on the amount of a partnership item described in [section 702(a)](/cfr/26/702.md?p=a) which may be taken into account for purposes of computing the taxable income of a partner shall be disregarded in computing the taxable income of the partnership.
    - (v) **Partner's share of partnership taxable income.** A taxpayer who is a partner in a partnership and is engaged in the active conduct of at least one of the partnership's trades or businesses includes as taxable income derived from the active conduct of a trade or business the amount of the taxpayer's allocable share of taxable income derived from the active conduct by the partnership of any trade or business (as determined under [paragraph (c)(2)(iv)](#c-2-iv) of this section).
  - (3) **S corporations and S corporation shareholders—**
    - (i) **In general.** Rules similar to those contained in [paragraphs (c)(2)](#c-2) (i) and (ii) of this section apply in the case of S corporations (as defined in [section 1361(a)](/cfr/26/1361.md?p=a)) and their shareholders. Each shareholder's share of the taxable income of an S corporation is determined under [section 1366](/cfr/26/1366.md).
    - (ii) **Taxable income of an S corporation.** The taxable income (or loss) derived from the active conduct by an S corporation of any trade or business is computed by aggregating the net income (or loss) from all of the trades or businesses actively conducted by the S corporation during the taxable year. The net income (or loss) from a trade or business actively conducted by an S corporation is determined by taking into account the aggregate amount of the S corporation's items described in [section 1366(a)](/cfr/26/1366.md?p=a) (other than credits, tax-exempt income, and deductions for compensation paid to an S corporation's shareholder-employees) derived from that trade or business. For purposes of determining the aggregate amount of S corporation items, deductions and losses are treated as negative income. Any limitation on the amount of an S corporation item described in [section 1366(a)](/cfr/26/1366.md?p=a) which may be taken into account for purposes of computing the taxable income of a shareholder shall be disregarded in computing the taxable income of the S corporation.
    - (iii) **Shareholder's share of S corporation taxable income.** Rules similar to those contained in paragraph [(c)(2)(v)](#c-2-v) and [(c)(6)(ii)](#c-6-ii) of this section apply to a taxpayer who is a shareholder in an S corporation and is engaged in the active conduct of the S corporation's trades or businesses.
  - (4) **Taxable income of a corporation other than an S corporation.** The aggregate amount of taxable income derived from the active conduct by a corporation other than an S corporation of any trade or business is the amount of the corporation's taxable income before deducting its net operating loss deduction and special deductions (as reported on the corporation's income tax return), adjusted to reflect those items of income or deduction included in that amount that were not derived by the corporation from a trade or business actively conducted by the corporation during the taxable year.
  - (5) **Ordering rule for certain circular problems—**
    - (i) **In general.** A taxpayer who elects to expense the cost of [section 179](/cfr/26/179.md) property (the deduction of which is subject to the taxable income limitation) also may have to apply another Internal Revenue Code section that has a limitation based on the taxpayer's taxable income. Except as provided in [paragraph (c)(1)](#c-1) of this section, this section provides rules for applying the taxable income limitation under [section 179](/cfr/26/179.md) in such a case. First, taxable income is computed for the other section of the Internal Revenue Code. In computing the taxable income of the taxpayer for the other section of the Internal Revenue Code, the taxpayer's [section 179](/cfr/26/179.md) deduction is computed by assuming that the taxpayer's taxable income is determined without regard to the deduction under the other Internal Revenue Code section. Next, after reducing taxable income by the amount of the [section 179](/cfr/26/179.md) deduction so computed, a hypothetical amount of deduction is determined for the other section of the Internal Revenue Code. The taxable income limitation of the taxpayer under [section 179(b)(3)](/cfr/26/179.md?p=b-3) and this [paragraph (c)](#c) then is computed by including that hypothetical amount in determining taxable income.
    - (ii) **Example.** The following example illustrates the ordering rule described in [paragraph (c)(5)(i)](#c-5-i) of this section.
  - (6) **Active conduct by the taxpayer of a trade or business—**
    - (i) **Trade or business.** For purposes of this section and [§ 1.179-4(a)](/cfr/26/1.179-4.md?p=a), the term trade or business has the same meaning as in [section 162](/cfr/26/162.md) and the regulations thereunder. Thus, property held merely for the production of income or used in an activity not engaged in for profit (as described in [section 183](/cfr/26/183.md)) does not qualify as [section 179](/cfr/26/179.md) property and taxable income derived from property held for the production of income or from an activity not engaged in for profit is not taken into account in determining the taxable income limitation.
    - (ii) **Active conduct.** For purposes of this section, the determination of whether a trade or business is actively conducted by the taxpayer is to be made from all the facts and circumstances and is to be applied in light of the purpose of the active conduct requirement of [section 179(b)(3)(A)](/cfr/26/179.md?p=b-3-A). In the context of [section 179](/cfr/26/179.md), the purpose of the active conduct requirement is to prevent a passive investor in a trade or business from deducting [section 179](/cfr/26/179.md) expenses against taxable income derived from that trade or business. Consistent with this purpose, a taxpayer generally is considered to actively conduct a trade or business if the taxpayer meaningfully participates in the management or operations of the trade or business. Generally, a partner is considered to actively conduct a trade or business of the partnership if the partner meaningfully participates in the management or operations of the trade or business. A mere passive investor in a trade or business does not actively conduct the trade or business.
    - (iii) **Example.** The following example illustrates the provisions of [paragraph (c)(6)(ii)](#c-6-ii) of this section.
    - (iv) **Employees.** For purposes of this section, employees are considered to be engaged in the active conduct of the trade or business of their employment. Thus, wages, salaries, tips, and other compensation (not reduced by unreimbursed employee business expenses) derived by a taxpayer as an employee are included in the aggregate amount of taxable income of the taxpayer under [paragraph (c)(1)](#c-1) of this section.
  - (7) **Joint returns—**
    - (i) **In general.** The taxable income limitation of this [paragraph (c)](#c) is applied to a husband and wife who file a joint income tax return under [section 6013(a)](/cfr/26/6013.md?p=a) by aggregating the taxable income of each spouse (as determined under [paragraph (c)(1)](#c-1) of this section).
    - (ii) **Joint returns filed after separate returns.** In the case of a husband and wife who elect under [section 6013(b)](/cfr/26/6013.md?p=b) to file a joint income tax return for a taxable year after the time prescribed by law for filing the return for such taxable year, the taxable income limitation of this [paragraph (c)](#c) for the taxable year for which the joint return is filed is determined under [paragraph (c)(7)(i)](#c-7-i) of this section.
  - (8) **Married individuals filing separately.** In the case of an individual who is married but files a separate tax return for a taxable year, the taxable income limitation for that individual is determined under [paragraph (c)(1)](#c-1) of this section by treating the husband and wife as separate taxpayers.
- (d) **Examples.** The following examples illustrate the provisions of paragraphs [(b)](#b) and [(c)](#c) of this section.

# §1.179-3. Carryover of disallowed deduction.

- (a) **In general.** Under [section 179(b)(3)(B)](/cfr/26/179.md?p=b-3-B), a taxpayer may carry forward for an unlimited number of years the amount of any cost of [section 179](/cfr/26/179.md) property elected to be expensed in a taxable year but disallowed as a deduction in that taxable year because of the taxable income limitation of [section 179(b)(3)(A)](/cfr/26/179.md?p=b-3-A) and [§ 1.179-2(c)](/cfr/26/1.179-2.md?p=c) (“carryover of disallowed deduction”). This carryover of disallowed deduction may be deducted under [section 179(a)](/cfr/26/179.md?p=a) and [§ 1.179-1(a)](/cfr/26/1.179-1.md?p=a) in a future taxable year as provided in [paragraph (b)](#b) of this section.
- (b) **Deduction of carryover of disallowed deduction—**
  - (1) **In general.** The amount allowable as a deduction under [section 179(a)](/cfr/26/179.md?p=a) and [§ 1.179-1(a)](/cfr/26/1.179-1.md?p=a) for any taxable year is increased by the lesser of—
    - (i) The aggregate amount disallowed under [section 179(b)(3)(A)](/cfr/26/179.md?p=b-3-A) and [§ 1.179-2(c)](/cfr/26/1.179-2.md?p=c) for all prior taxable years (to the extent not previously allowed as a deduction by reason of this section); or
    - (ii) The amount of any unused [section 179](/cfr/26/179.md) expense allowance for the taxable year (as described in [paragraph (c)](#c) of this section).
  - (2) **Cross references.** See [paragraph (f)](#f) of this section for rules that apply when a taxpayer disposes of or otherwise transfers [section 179](/cfr/26/179.md) property for which a carryover of disallowed deduction is outstanding. See [paragraph (g)](#g) of this section for special rules that apply to partnerships and S corporations and [paragraph (h)](#h) of this section for special rules that apply to partners and S corporation shareholders.
- (c) **Unused section 179 expense allowance.** The amount of any unused [section 179](/cfr/26/179.md) expense allowance for a taxable year equals the excess (if any) of—
  - (1) The maximum cost of [section 179](/cfr/26/179.md) property that the taxpayer may deduct under [section 179](/cfr/26/179.md) and [§ 1.179-1](/cfr/26/1.179-1.md) for the taxable year after applying the limitations of [section 179(b)](/cfr/26/179.md?p=b) and [§ 1.179-2](/cfr/26/1.179-2.md); over
  - (2) The amount of [section 179](/cfr/26/179.md) property that the taxpayer actually elected to expense under [section 179](/cfr/26/179.md) and [§ 1.179-1(a)](/cfr/26/1.179-1.md?p=a) for the taxable year.
- (d) **Example.** The following example illustrates the provisions of paragraphs [(b)](#b) and [(c)](#c) of this section.
- (e) **Recordkeeping requirement and ordering rule.** The properties and the apportionment of cost that will be subject to a carryover of disallowed deduction are selected by the taxpayer in the year the properties are placed in service. This selection must be evidenced on the taxpayer's books and records and be applied consistently in subsequent years. If no selection is made, the total carryover of disallowed deduction is apportioned equally over the items of [section 179](/cfr/26/179.md) property elected to be expensed for the taxable year. For this purpose, the taxpayer treats any [section 179](/cfr/26/179.md) expense amount allocated from a partnership (or an S corporation) for a taxable year as one item of [section 179](/cfr/26/179.md) property. If the taxpayer is allowed to deduct a portion of the total carryover of disallowed deduction under [paragraph (b)](#b) of this section, the taxpayer must deduct the cost of [section 179](/cfr/26/179.md) property carried forward from the earliest taxable year.
- (f) **Dispositions and other transfers of section 179 property—**
  - (1) **In general.** Upon a sale or other disposition of [section 179](/cfr/26/179.md) property, or a transfer of [section 179](/cfr/26/179.md) property in a transaction in which gain or loss is not recognized in whole or in part (including transfers at death), immediately before the transfer the adjusted basis of the [section 179](/cfr/26/179.md) property is increased by the amount of any outstanding carryover of disallowed deduction with respect to the property. This carryover of disallowed deduction is not available as a deduction to the transferor or the transferee of the [section 179](/cfr/26/179.md) property.
  - (2) **Recapture under section 179(d)(10).** Under [§ 1.179-1(e)](/cfr/26/1.179-1.md?p=e), if a taxpayer's [section 179](/cfr/26/179.md) property is subject to recapture under [section 179(d)(10)](/cfr/26/179.md?p=d-10), the taxpayer must recapture the benefit derived from expensing the property. Upon recapture, any outstanding carryover of disallowed deduction with respect to the property is no longer available for expensing. In determining the amount subject to recapture under [section 179(d)(10)](/cfr/26/179.md?p=d-10) and [§ 1.179-1(e)](/cfr/26/1.179-1.md?p=e), any outstanding carryover of disallowed deduction with respect to that property is not treated as an amount expensed under [section 179](/cfr/26/179.md).
- (g) **Special rules for partnerships and S corporations—**
  - (1) **In general.** Under [section 179(d)(8)](/cfr/26/179.md?p=d-8) and [§ 1.179-2(c)](/cfr/26/1.179-2.md?p=c), the taxable income limitation applies at the partnership level as well as at the partner level. Therefore, a partnership may have a carryover of disallowed deduction with respect to the cost of its [section 179](/cfr/26/179.md) property. Similar rules apply to S corporations. This [paragraph (g)](#g) provides special rules that apply when a partnership or an S corporation has a carryover of disallowed deduction.
  - (2) **Basis adjustment.** Under [§ 1.179-1(f)(2)](/cfr/26/1.179-1.md?p=f-2), the basis of a partnership's [section 179](/cfr/26/179.md) property must be reduced to reflect the amount of [section 179](/cfr/26/179.md) expense elected by the partnership. This reduction must be made for the taxable year for which the election is made even if the [section 179](/cfr/26/179.md) expense amount, or a portion thereof, must be carried forward by the partnership. Similar rules apply to S corporations.
  - (3) **Dispositions and other transfers of section 179 property by a partnership or an S corporation.** The provisions of [paragraph (f)](#f) of this section apply in determining the treatment of any outstanding carryover of disallowed deduction with respect to [section 179](/cfr/26/179.md) property disposed of, or transferred in a nonrecognition transaction, by a partnership or an S corporation.
  - (4) **Example.** The following example illustrates the provisions of this [paragraph (g)](#g).
- (h) **Special rules for partners and S corporation shareholders—**
  - (1) **In general.** Under [section 179(d)(8)](/cfr/26/179.md?p=d-8) and [§ 1.179-2(c)](/cfr/26/1.179-2.md?p=c), a partner may have a carryover of disallowed deduction with respect to the cost of [section 179](/cfr/26/179.md) property elected to be expensed by the partnership and allocated to the partner. A partner who is allocated [section 179](/cfr/26/179.md) expenses from a partnership must reduce the basis of his or her partnership interest by the full amount allocated regardless of whether the partner may deduct for the taxable year the allocated [section 179](/cfr/26/179.md) expenses or is required to carry forward all or a portion of the expenses. Similar rules apply to S corporation shareholders.
  - (2) **Dispositions and other transfers of a partner's interest in a partnership or a shareholder's interest in an S corporation.** A partner who disposes of a partnership interest, or transfers a partnership interest in a transaction in which gain or loss is not recognized in whole or in part (including transfers of a partnership interest at death), may have an outstanding carryover of disallowed deduction of [section 179](/cfr/26/179.md) expenses allocated from the partnership. In such a case, immediately before the transfer the partner's basis in the partnership interest is increased by the amount of the partner's outstanding carryover of disallowed deduction with respect to the partnership interest. This carryover of disallowed deduction is not available as a deduction to the transferor or transferee partner of the [section 179](/cfr/26/179.md) property. Similar rules apply to S corporation shareholders.
  - (3) **Examples.** The following examples illustrate the provisions of this [paragraph (h)](#h).

# §1.179-4. Definitions.


The following definitions apply for purposes of [section 179](/cfr/26/179.md) and [§§ 1.179-1 through 1.179-6](/cfr/26/1.179-1..1.179-6.md):

- (a) **Section 179 property.** The term [section 179](/cfr/26/179.md) property means any tangible property described in [section 179(d)(1)](/cfr/26/179.md?p=d-1) that is acquired by purchase for use in the active conduct of the taxpayer's trade or business (as described in [§ 1.179-2(c)(6)](/cfr/26/1.179-2.md?p=c-6)). For taxable years beginning after 2002 and before 2008, the term [section 179](/cfr/26/179.md) property includes computer software described in [section 179(d)(1)](/cfr/26/179.md?p=d-1) that is placed in service by the taxpayer in a taxable year beginning after 2002 and before 2008 and is acquired by purchase for use in the active conduct of the taxpayer's trade or business (as described in 1.179-2(c)(6)). For purposes of this [paragraph (a)](#a), the term trade or business has the same meaning as in [section 162](/cfr/26/162.md) and the regulations under [section 162](/cfr/26/162.md).
- (b) **Section 38 property.** The term [section 38](/cfr/26/38.md) property shall have the same meaning assigned to it in [section 48(a)](/cfr/26/48.md?p=a) and the regulations thereunder.
- (c) **Purchase.**
  - (1)
    - (i) Except as otherwise provided in paragraph (d)(2) of this section, the term purchase means any acquisition of the property, but only if all the requirements of [paragraphs (c)(1)](#c-1) (ii), (iii), and (iv) of this section are satisfied.
    - (ii) Property is not acquired by purchase if it is acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under section [267](/cfr/26/267.md) or [707(b)](/cfr/26/707.md?p=b). The property is considered not acquired by purchase only to the extent that losses would be disallowed under section [267](/cfr/26/267.md) or [707(b)](/cfr/26/707.md?p=b). Thus, for example, if property is purchased by a husband and wife jointly from the husband's father, the property will be treated as not acquired by purchase only to the extent of the husband's interest in the property. However, in applying the rules of section [267 (b)](/cfr/26/267.md?p=b) and [(c)](/cfr/26/267.md?p=c) for this purpose, [section 267(c)(4)](/cfr/26/267.md?p=c-4) shall be treated as providing that the family of an individual will include only his spouse, ancestors, and lineal descendants. For example, a purchase of property from a corporation by a taxpayer who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of such corporation does not qualify as a purchase under [section 179(d)(2)](/cfr/26/179.md?p=d-2); nor does the purchase of property by a husband from his wife. However, the purchase of [section 179](/cfr/26/179.md) property by a taxpayer from his brother or sister does qualify as a purchase for purposes of [section 179(d)(2)](/cfr/26/179.md?p=d-2).
    - (iii) The property is not acquired by purchase if acquired from a component member of a controlled group of corporations (as defined in paragraph (g) of this section) by another component member of the same group.
    - (iv) The property is not acquired by purchase if the basis of the property in the hands of the person acquiring it is determined in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, is determined under [section 1014(a)](/cfr/26/1014.md?p=a), relating to property acquired from a decedent, or is determined under [section 1022](/cfr/26/1022.md), relating to property acquired from certain decedents who died in 2010. For example, property acquired by gift or bequest does not qualify as property acquired by purchase for purposes of [section 179(d)(2)](/cfr/26/179.md?p=d-2); nor does property received in a corporate distribution the basis of which is determined under [section 301(d)(2)(B)](/cfr/26/301.md?p=d-2-B), property acquired by a corporation in a transaction to which [section 351](/cfr/26/351.md) applies, property acquired by a partnership through contribution ([section 723](/cfr/26/723.md)), or property received in a partnership distribution which has a carryover basis under [section 732(a)(1)](/cfr/26/732.md?p=a-1).
  - (2) Property deemed to have been acquired by a new target corporation as a result of a [section 338](/cfr/26/338.md) election (relating to certain stock purchases treated as asset acquisitions) or a [section 336(e)](/cfr/26/336.md?p=e) election (relating to certain stock dispositions treated as asset transfers) made for a disposition described in [§ 1.336-2(b)(1)](/cfr/26/1.336-2.md?p=b-1) will be considered acquired by purchase.
- (d) **Cost.** The cost of [section 179](/cfr/26/179.md) property does not include so much of the basis of such property as is determined by reference to the basis of other property held at any time by the taxpayer. For example, X Corporation purchases a new drill press costing $10,000 in November 1984 which qualifies as [section 179](/cfr/26/179.md) property, and is granted a trade-in allowance of $2,000 on its old drill press. The old drill press had a basis of $1,200. Under the provisions of sections [1012](/cfr/26/1012.md) and [1031(d)](/cfr/26/1031.md?p=d), the basis of the new drill press is $9,200 ($1,200 basis of oil drill press plus cash expended of $8,000). However, only $8,000 of the basis of the new drill press qualifies as cost for purposes of the [section 179](/cfr/26/179.md) expense deduction; the remaining $1,200 is not part of the cost because it is determined by reference to the basis of the old drill press.
- (e) **Placed in service.** The term placed in service means the time that property is first placed by the taxpayer in a condition or state of readiness and availability for a specifically assigned function, whether for use in a trade or business, for the production of income, in a tax-exempt activity, or in a personal activity. See [§ 1.46-3(d)(2)](/cfr/26/1.46-3.md?p=d-2) for examples regarding when property shall be considered in a condition or state of readiness and availability for a specifically assigned function.
- (f) **Controlled group of corporations and component member of controlled group.** The terms controlled group of corporations and component member of a controlled group of corporations shall have the same meaning assigned to those terms in section [1563 (a)](/cfr/26/1563.md?p=a) and [(b)](/cfr/26/1563.md?p=b), except that the phrase “more than 50 percent” shall be substituted for the phrase “at least 80 percent” each place it appears in [section 1563(a)(1)](/cfr/26/1563.md?p=a-1).

# §1.179-5. Time and manner of making election.

- (a) **Election.** A separate election must be made for each taxable year in which a [section 179](/cfr/26/179.md) expense deduction is claimed with respect to [section 179](/cfr/26/179.md) property. The election under [section 179](/cfr/26/179.md) and [§ 1.179-1](/cfr/26/1.179-1.md) to claim a [section 179](/cfr/26/179.md) expense deduction for [section 179](/cfr/26/179.md) property shall be made on the taxpayer's first income tax return for the taxable year to which the election applies (whether or not the return is timely) or on an amended return filed within the time prescribed by law (including extensions) for filing the return for such taxable year. The election shall be made by showing as a separate item on the taxpayer's income tax return the following items:
  - (1) The total [section 179](/cfr/26/179.md) expense deduction claimed with respect to all [section 179](/cfr/26/179.md) property selected, and
  - (2) **The portion of that deduction allocable to each specific item.**
- (b) **Revocation.** Any election made under [section 179](/cfr/26/179.md), and any specification contained in such election, may not be revoked except with the consent of the Commissioner. Such consent will be granted only in extraordinary circumstances. Requests for consent must be filed with the Commissioner of Internal Revenue, Washington, DC 20224. The request must include the name, address, and taxpayer identification number of the taxpayer and must be signed by the taxpayer or his duly authorized representative. It must be accompanied by a statement showing the year and property involved, and must set forth in detail the reasons for the request.
- (c) **Section 179 property placed in service by the taxpayer in a taxable year beginning after 2002 and before 2008—**
  - (1) **In general.** For any taxable year beginning after 2002 and before 2008, a taxpayer is permitted to make or revoke an election under [section 179](/cfr/26/179.md) without the consent of the Commissioner on an amended Federal tax return for that taxable year. This amended return must be filed within the time prescribed by law for filing an amended return for such taxable year.
  - (2) **Election—**
    - (i) **In general.** For any taxable year beginning after 2002 and before 2008, a taxpayer is permitted to make an election under [section 179](/cfr/26/179.md) on an amended Federal tax return for that taxable year without the consent of the Commissioner. Thus, the election under [section 179](/cfr/26/179.md) and [§ 1.179-1](/cfr/26/1.179-1.md) to claim a [section 179](/cfr/26/179.md) expense deduction for [section 179](/cfr/26/179.md) property may be made on an amended Federal tax return for the taxable year to which the election applies. The amended Federal tax return must include the adjustment to taxable income for the [section 179](/cfr/26/179.md) election and any collateral adjustments to taxable income or to the tax liability (for example, the amount of depreciation allowed or allowable in that taxable year for the item of [section 179](/cfr/26/179.md) property to which the election pertains). Such adjustments must also be made on amended Federal tax returns for any affected succeeding taxable years.
    - (ii) **Specifications of elections.** Any election under [section 179](/cfr/26/179.md) must specify the items of [section 179](/cfr/26/179.md) property and the portion of the cost of each such item to be taken into account under [section 179(a)](/cfr/26/179.md?p=a). Any election under [section 179](/cfr/26/179.md) must comply with the specification requirements of [section 179(c)(1)(A)](/cfr/26/179.md?p=c-1-A), [§ 1.179-1(b)](/cfr/26/1.179-1.md?p=b), and [§ 1.179-5(a)](#a). If a taxpayer elects to expense only a portion of the cost basis of an item of [section 179](/cfr/26/179.md) property for a taxable year beginning after 2002 and before 2008 (or did not elect to expense any portion of the cost basis of the item of [section 179](/cfr/26/179.md) property), the taxpayer is permitted to file an amended Federal tax return for that particular taxable year and increase the portion of the cost of the item of [section 179](/cfr/26/179.md) property to be taken into account under [section 179(a)](/cfr/26/179.md?p=a) (or elect to expense any portion of the cost basis of the item of [section 179](/cfr/26/179.md) property if no prior election was made) without the consent of the Commissioner. Any such increase in the amount expensed under [section 179](/cfr/26/179.md) is not deemed to be a revocation of the prior election for that particular taxable year.
  - (3) **Revocation—**
    - (i) **In general.** [Section 179(c)(2)](/cfr/26/179.md?p=c-2) permits the revocation of an entire election or specification, or a portion of the selected dollar amount of a specification. The term specification in [section 179(c)(2)](/cfr/26/179.md?p=c-2) refers to both the selected specific item of [section 179](/cfr/26/179.md) property subject to a [section 179](/cfr/26/179.md) election and the selected dollar amount allocable to the specific item of [section 179](/cfr/26/179.md) property. Any portion of the cost basis of an item of [section 179](/cfr/26/179.md) property subject to an election under [section 179](/cfr/26/179.md) for a taxable year beginning after 2002 and before 2008 may be revoked by the taxpayer without the consent of the Commissioner by filing an amended Federal tax return for that particular taxable year. The amended Federal tax return must include the adjustment to taxable income for the [section 179](/cfr/26/179.md) revocation and any collateral adjustments to taxable income or to the tax liability (for example, allowable depreciation in that taxable year for the item of [section 179](/cfr/26/179.md) property to which the revocation pertains). Such adjustments must also be made on amended Federal tax returns for any affected succeeding taxable years. Reducing or eliminating a specified dollar amount for any item of [section 179](/cfr/26/179.md) property with respect to any taxable year beginning after 2002 and before 2008 results in a revocation of that specified dollar amount.
    - (ii) **Effect of revocation.** Such revocation, once made, shall be irrevocable. If the selected dollar amount reflects the entire cost of the item of [section 179](/cfr/26/179.md) property subject to the [section 179](/cfr/26/179.md) election, a revocation of the entire selected dollar amount is treated as a revocation of the [section 179](/cfr/26/179.md) election for that item of [section 179](/cfr/26/179.md) property and the taxpayer is unable to make a new [section 179](/cfr/26/179.md) election with respect to that item of property. If the selected dollar amount is a portion of the cost of the item of [section 179](/cfr/26/179.md) property, revocation of a selected dollar amount shall be treated as a revocation of only that selected dollar amount. The revoked dollars cannot be the subject of a new [section 179](/cfr/26/179.md) election for the same item of property.
  - (4) **Examples.** The following examples illustrate the rules of this [paragraph (c)](#c):
- (d) **Election or revocation must not be made in any other manner.** Any election or revocation specified in this section must be made in the manner prescribed in paragraphs [(a)](#a), [(b)](#b), and [(c)](#c) of this section. Thus, this election or revocation must not be made by the taxpayer in any other manner (for example, an election or a revocation of an election cannot be made through a request under [section 446(e)](/cfr/26/446.md?p=e) to change the taxpayer's method of accounting), except as otherwise expressly provided by the Internal Revenue Code, the regulations under the Code, or other guidance published in the Internal Revenue Bulletin.

# §1.179-6. Effective/applicability dates.

- (a) **In general.** Except as provided in paragraphs [(b)](#b), [(c)](#c), [(d)](#d), and [(e)](#e) of this section, the provisions of [§§ 1.179-1 through 1.179-5](/cfr/26/1.179-1..1.179-5.md) apply for property placed in service by the taxpayer in taxable years ending after January 25, 1993. However, a taxpayer may apply the provisions of [§§ 1.179-1 through 1.179-5](/cfr/26/1.179-1..1.179-5.md) to property placed in service by the taxpayer after December 31, 1986, in taxable years ending on or before January 25, 1993. Otherwise, for property placed in service by the taxpayer after December 31, 1986, in taxable years ending on or before January 25, 1993, the final regulations under [section 179](/cfr/26/179.md) as in effect for the year the property was placed in service apply, except to the extent modified by the changes made to [section 179](/cfr/26/179.md) by the Tax Reform Act of 1986 (100 Stat. 2085), the Technical and Miscellaneous Revenue Act of 1988 (102 Stat. 3342) and the Revenue Reconciliation Act of 1990 (104 Stat. 1388-400). For that property, a taxpayer may apply any reasonable method that clearly reflects income in applying the changes to [section 179](/cfr/26/179.md), provided the taxpayer consistently applies the method to the property.
- (b) **Section 179 property placed in service by the taxpayer in a taxable year beginning after 2002 and before 2008.** The provisions of § [1.179-2(b)(1)](/cfr/26/1.179-2.md?p=b-1) and [(b)(2)(ii)](/cfr/26/1.179-2.md?p=b-2-ii), the second sentence of [§ 1.179-4(a)](/cfr/26/1.179-4.md?p=a), and the provisions of [§ 1.179-5(c)](/cfr/26/1.179-5.md?p=c), reflecting changes made to [section 179](/cfr/26/179.md) by the Jobs and Growth Tax Relief Reconciliation Act of 2003 (117 Stat. 752) and the American Jobs Creation Act of 2004 (118 Stat. 1418), apply for property placed in service in taxable years beginning after 2002 and before 2008.
- (c) **Application of § 1.179-5(d).** [Section 1.179-5(d)](/cfr/26/1.179-5.md?p=d) applies on or after July 12, 2005.
- (d) **Application of § 1.179-4(c)(1)(iv).** The provisions of [§ 1.179-4(c)(1)(iv)](/cfr/26/1.179-4.md?p=c-1-iv) relating to [section 1022](/cfr/26/1022.md) are effective on and after January 19, 2017.
- (e) **Application of § 1.179-4(c)(2)—**
  - (1) **In general.** Except as provided in paragraphs [(e)(2)](#e-2) and [(3)](#e-3) of this section, the provisions of [§ 1.179-4(c)(2)](/cfr/26/1.179-4.md?p=c-2) relating to [section 336(e)](/cfr/26/336.md?p=e) are applicable on or after September 24, 2019.
  - (2) **Early application of § 1.179-4(c)(2).** A taxpayer may choose to apply the provisions of [§ 1.179-4(c)(2)](/cfr/26/1.179-4.md?p=c-2) relating to [section 336(e)](/cfr/26/336.md?p=e) for the taxpayer's taxable years ending on or after September 28, 2017.
  - (3) **Early application of regulation project REG-104397-18.** A taxpayer may rely on the provisions of [§ 1.179-4(c)(2)](/cfr/26/1.179-4.md?p=c-2) relating to [section 336(e)](/cfr/26/336.md?p=e) in regulation project REG-104397-18 (2018-41 I.R.B. 558) (see [§ 601.601(d)(2)(ii)(b)](/cfr/26/601.601.md?p=d-2-ii-b) of this chapter) for the taxpayer's taxable years ending on or after September 28, 2017, and ending before September 24, 2019.