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Wallstreet Esq.
Wallstreet Esq., Tax Attorney
Category: Tax
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Experience:  10 years experience
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I have a question about using a creative strategy to maximize

Customer Question

I have a question about using a creative strategy to maximize my section 179 deduction. I currently have an S-Corporation that provide audio-visual equipment rentals for business meetings and events. Year to date, I have spent approximately $200,000 on equipment that would be eligible for Sec 179 deduction. I would like to use the deduction to shelter another $600,000 in taxes. Here is how I am proposing to do it.

I would like to purchase another $300,000 in equipment for use for our core business. There is also a supplier of our company that can use a piece of equipment that carries a $300,000 purchase price.

I would like to establish a new C-Corporation (this year) that would purchase and lease out the $300K in equipment to my S-corporation, and the $300k piece of equipment for the supplier. Since this new C-corp would have no income I couldn't write off the deduction this year, but I could roll over the deduction to next year when I assumedly will have the income to write it off.

I would like to know if this plan sounds feasible, and if there are any limitations to it that I'm not forseeing. I will absolutely pay a premium for a thoughtful knowledgable answer.

Thanks!
Submitted: 3 years ago.
Category: Tax
Expert:  MequonCPA replied 3 years ago.
Questions:

1. C corp purchases $300K in equipment and leases to S Corp. Is the lease an operating lease or a lease purchase?

2. C corp purchases an additional $300K in equipment to lease to a third party, is this correct.

What will happen to the equipment at the termination of the leases.

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