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Dear RAGANGANTT -
Section 179 is an election to expense assets that would normally be depreciated.
An LLC cannot pass through section 179 deductions if it has a loss. It can make the election but the deduction is carried forward at the partnership level until the LLC has income. At that point it becomes a deduction and is passed through to the members. I am providing links to 2007 Form 4562 and instructions. The entry on line 11 of Form 4562 is the business income of the LLC (excluding section 179) but not less than zero. The deduction is the lesser of the Section 179 allowance elected or the income of the entity shown on line 11.
There are two tiers of limitations. The first is the entity limitation. The entity must have income before the section 179 deduction before being able to use it currently.
Then each member has their own annual limitation. This limitation allows you to include wages as business income.
See pages 20 - 23 of IRS Publication 946 for details (link below).
Sorry things didn't work out. In that case, don't take Section 179, just take the appropriate depreciation.