Brad is a shareholder and full-time employee of an S corporation. During 2020, he earns a $50,000 salary from the S corporation and is allocated $12,000 as his share of its net operating loss. In addition, Brad owns a limited partnership interest from which he earns $12,000 during 2020. Kanika, Brads wife, operates a small business as a sole proprietorship. During 2020, she spends $65,000 on equipment for use in her business, which has a taxable income of $17,000 before the Section 179 deduction.

a. Assuming that Brad and Kanika elect to expense the maximum amount under Section 179, what is the allowable deduction for 2020?

Their maximum Section 179 deduction for 2020 is $65,000 but will be limited to_______________.

b. Brad is allocated $12,000 in Section 179 expense from the S corporation for 2021 and Kanika spends an additional $14,000 on equipment for use in her business. And, their taxable active business income is $35,000 for 2021. Assuming the taxpayer elects to expense the maximum amount under Section 179, what is the allowable deduction for 2021 and, if applicable, any carryforward. Complete the table below outlining their deduction.

179 Election carryforward from 2020
179 Election from S corporation
Equipment purchased
Total Section 179 elected
Maximum section 179 expense deduction
Section 179 carryforward to 2022