The test applies at both the partner and partnership levels. The partnership must have taxable income equal to at least the 179 deduction…to the extent that it does, the partnership may allocate an aggregate of $24,000 (for 2001, any remainder gets carried over) of Section 179 expense amongst its partners. Each partner needs to have enough taxable income to cover its share of the 179 expense…ordinarily not a problem, since the partnership will generally pass sufficient income through to the partners.
With an LLC that owns a mh park and rental property as a business (doing partnership accounting), must the partnership itself show a net income equal to the 179 expense? Or could it show a loss and still use the 179 expenses if all the individuals within the partnership have sufficient income from sources (salaries from other employment, or self-employment) outside the business to equal the expense?