Notice 2013-59 - Election to expense costs of real property placed in service in tax years 2010-2013 

September 10:  The IRS today released an advance copy of Notice 2013-59 as guidance to taxpayers that choose under section 179(f) to treat as an expense the costs of certain "qualified real property" placed in service during any tax year beginning in 2010, 2011, 2012, or 2013.

For these tax years, the general limitation on the amount that can be deducted under section 179 is, annually, $500,000. Also, for these tax years, a taxpayer has been permitted under section 179(f) to apply up to $250,000 of its annual limitation to property that is qualified leasehold improvement property, qualified restaurant property, or qualified retail improvement property. Such property would, as part of a building, otherwise not be eligible for any deduction under section 179.

The $500,000 limit is reduced, dollar for dollar, when the total amount of section 179 property placed in service in a tax year exceeds $2 million. Also, while a taxpayer can elect to apply section 179 to up to $500,000 a year, the amount deductible under section 179 for any tax year cannot exceed the taxpayer’s taxable income from active trades or businesses; any excess is carried over to later years.

Notice 2013-59 [PDF 43 KB] reflects the extension of application of section 179(f) from any tax year beginning in 2010 or 2011 to any tax year beginning in 2010, 2011, 2012, or 2013, and:

  • Defines which real property is eligible for the election
  • Explains how to make the election to apply section 179(f) to qualified real property
  • Explains how excess section 179(f) deductions are carried over and taken into account in future years
  • Provides allocation methodologies for determining section 1245 and section 1250 recapture upon the sale or other disposition of qualified real property when the unadjusted basis is reduced by the section 179 deduction

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