Rev Proc 2007-60, 2007-39 IRB
IRS has issued a revenue procedure correcting the inflation adjusted amounts listed in previous IRS guidance for taxpayers who elect to expense depreciable assets under Code Sec. 179. The correction is a result of changes made by the Small Business and Work Opportunity Tax Act of 2007.

Background. Before the 2007 Small Business Tax Act (P.L. 110-28) was enacted, for tax years beginning after 2002 and before 2010, there was a $100,000 limitation on the aggregate cost of Code Sec. 179 property that could be treated as an expense (former Code Sec. 179(b)(1)) and the $100,000 amount was reduced by the amount by which the cost of Code Sec. 179 property placed in service during the tax year exceeded $400,000. (former Code Sec. 179(b)(2)) Both the $100,000 and $400,000 amounts were adjusted for inflation annually. Rev Proc 2006-53, 2006-48 IRB 996, Sec. 3.19, provided that for tax years beginning in 2007, the $100,000 and $400,000 amounts, as adjusted for inflation, were $112,000 and $450,000, respectively (see Federal Taxes Weekly Alert 09/21/2006 and 11/16/2006).

Expensing correction. Reflecting changes made in the 2007 Small Business Tax Act, Rev Proc 2007-60 clarifies that for tax years beginning in 2007, the aggregate cost of any Code Sec. 179 property that a taxpayer may elect to treat as an expense can't exceed $125,000 under Code Sec. 179(b)(1) and that the $125,000 limitation is reduced (but not below zero) by the amount by which the cost of Code Sec. 179 property placed in service during the 2007 tax year exceeds $500,000 under Code Sec. 179(b)(2). For tax years beginning after 2007 and before 2011, the $125,000 and $500,000 amounts will be adjusted for inflation.

Source:  Federal Taxes Weekly Alert (preview) 09/13/2007, Volume 53, No. 37