MLR

Each S corp of a controlled group can max out expense deduction

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The IRS has determined that S corporations that are members of a controlled group of corporations are not subject to the rule that limits the controlled group’s maximum annual Code Section 179 expense deduction.

Accordingly, these S corporations are treated as separate entities for purposes of that limit and can make Section 179 elections up to the maximum election amount ($500,000 for 2013). This determination was provided in an IRS information letter (Information Letter 2013-0016).

In general, a controlled group is a group of corporations under common control. The controlled group rules are designed to prevent taxpayers from multiplying the number of tax benefits they are entitled to simply by forming additional corporations. For example, three C corporations that are members of a controlled group must share a single Section 179 expense deduction up to the maximum amount allowed for the year.

The IRS has determined that an S corporation member of a controlled group can make a Section 179 election up to the maximum election amount and is not subject to the group’s overall limit, even if the S corporation is otherwise a member of the group.