IRS says I.R.C. §179 Elections and Revocations Can Be Made Through 2010

August 29, 2008 | Roger McEowen


The IRS has publicly confirmed it's private position taken last fall that I.R.C. §179 elections can be made on amended returns through 2010. Here's the issue:

For assets placed in service for tax years beginning in 2003-2010, an I.R.C. §179 election can be made by filing an amended return for the year the asset was placed in service and claiming the deduction.  The amended return can be filed any time before the 3-year statute of limitations expires for the year the assets subject to the election are placed in service.  This flexibility in the law originated with the 2003 Tax Act, which specified that taxpayers could make or revoke an expense method depreciation election on an amended return.  The conference committee report to the legislation specifies that for a tax year beginning after 2002 and before 2006, the provision permits taxpayers to make or revoke an expensing election on amended returns without IRS consent.  The Congress amended the underlying statute a couple of additional times to extend the time-frame for revocations without IRS consent.  That timeframe presently extends the timeframe for revocations to be made on an amended return for tax years beginning before 2011 without the IRS consent.

While the statute doesn't mention an extension of time for making the §179 election on an amended return after 2007, IRS has taken the position that all subsequent statutory time extensions enacted after the 2003 Tax Act apply to both revocations and elections.  IRS is following the conference committee report language on the 2003 Tax Act that says the legislation applies to elections and revocations.  In late 2007, the IRS Office of Associate Chief Counsel privately stated its belief that this position is consistent with the intent of the Congress and Treas. Reg. 1.167(e)-1, and did not require that any additional regulation be issued.  Thus, as of late 2007, it was known that this was a non-issue to IRS - elections could be made on amended returns through 2010. That's the message we conveyed to you at the ISU Farm Tax School last fall and the Iowa Bar Tax School. The Treasury also stated in T.D. 9307 (Dec. 26, 2006), in response to a question raised at the hearing on the T.D. that §179 elections and revocations can be made on amended returns through 2009.  But, that T.D. was issued before the most recent statutory amendment which, in the IRS view, extends the period for elections and revocations through 2010.

IRS has now taken the additional step of making their private statement public by issuing a Revenue Procedure stating that taxpayers may make an I.R.C. §179 election on an amended return through 2010. The Treasury intends to amend Treas. Reg. §1.179-5(c) to clarify that an I.R.C. §179 election can be made on an amended return through 2010. Until the regulation is amended, IRS says taxpayers may rely on the Revenue Procedure. Rev. Proc. 2008-54, 2008 I.R.B. LEXIS 698.

The matter is clearly a non-issue for 2008, 2009 and 2010. In addition, the ability to make elections and revocations through 2010 on amended returns provides great tax planning opportunities.