Restaurant investors secure $30,000 applying the 179 deduction

Our client’s need

Baker Tilly’s client is a limited liability company (LLC) that holds a 33 percent investment in a local restaurant. The LLC is owned by two individuals and two trusts. In 2013, the other owners of the restaurant approached our client with its decision to take advantage of section 179 and fully depreciate $300,000 of new additions. The two trusts own roughly 30 percent of the LLC and trusts are not eligible to take the section 179 deduction. This means that of the $100,000 that would be allocated to our client, $30,000 of that deduction would be lost permanently.

Our client informed their Baker Tilly tax advisors of the restaurant’s decision to employ section 179. Once our client realized that 30 percent of the LLC members could not take advantage of this deduction, they asked Baker Tilly to request that the restaurant not use section 179 and instead take bonus and regular depreciation on these assets. The other owners of the restaurant disagreed and outvoted our client on this matter.

Baker Tilly solution

Baker Tilly proposed that the LLC trust members did not have to forfeit this cost-saving deduction of $30,000. Baker Tilly researched alternative depreciation methods and after review determined that the trusts could allocate the disallowed 179 deduction to its share of the new additions, and then depreciate the deductions over the lives of the assets. This way, the deduction can be taken over time and not be lost.

Results achieved

Baker Tilly’s specialized tax knowledge and commitment to Exceptional Client Service secured a substantial deduction for our client that they would have otherwise forfeited. This approach can also be taken in future years if the restaurant again decides to use 179 depreciation.

For more information on this topic, or to learn how Baker Tilly tax specialists can help, contact our team.

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely.  The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.