In an asset purchase, the buyer acquires and depreciates the cost of fixed assets over time. However, Section 179 of the Internal Revenue Code allows businesses to deduct the costs of equipment and computer software immediately in the year of acquisition, that is, expense the costs rather than depreciate it over time. Currently, the maximum amount that can be expensed in a year is $500,000.00, and that limit is reduced by the amount by which the cost of the eligible property placed in service during the year exceeds $2,000,000.00. The Tax Cuts and Jobs Act (Brady Bill) recently introduced by the House Ways and Means Committee proposes to substantially increase those amounts. Under the proposed bill, the $500,000.00 deduction limit would be increased to $5,000,000.00 and the $2,000,000.00 phase out trigger would be increased to $20,000,000.00. We will monitor whether this proposed change makes its way into any final tax bill that is enacted. If it does, the change could be a significant boon to purchasers acquiring a business with significant equipment and/or software.
ABOUT GLENN D. SOLOMON
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Glenn D. Solomon is a principal at Offit Kurman and has provided counsel to businesses and business owners for more than twenty-five years. He has extensive experience in the purchase and sale of businesses, structuring ownership agreements, and advising companies in financial distress.
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