Calvin's Computer Case

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Calvin has bought a notebook computer and peripheral equipment including printer/scanner, software, external hard drive, and additional flat panel monitor (from here on out referred to as “computer”) costing $5,000 during the tax year. His employer, Diversified Investments did not reimburse him for the purchase of this notebook computer. The computer is used twenty-five percent for business use and seventy-five percent for personal use. The business use of this computer is related to Calvin’s business of being an employee of Diversified Investments. The computer is exclusively used at Calvin’s home. In addition, purchase of the notebook computer is not a condition of employment for Calvin to be employed at Diversified Investments.

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Under this section, it would appear that some amount of Calvin’s computer may be deducted as a portion of the computer is used for business. However, this is a broad section of the tax code. Further research reveals that the computer may be eligible for deduction under different sections. As a capital asset, the computer might be eligible for depreciation. Section 167 states “There shall be allowed as a depreciation deduction a reasonable allowance for the exhaustion, wear and tear (including a reasonable allowance for obsolescence) (1) of property used in the trade or business, or (2) of property held for the production of income.” If it is determined that the computer is used in “trade or business” it would be eligible for deduction under the first point. However, Section 179 might also apply to the the property. Property that section 179 applies to is defined in section 179(d)(1) as “ Section 179 property means property which is (i) tangible property… or (ii) computer software…” Calvin's computer falls under both of these categories. Section 179(a) states that “A taxpayer may elect to treat the cost of any section 179 property as an expense which is not chargeable to capital account. Any cost so treated shall be allowed as a deduction for the taxable year in which the section 179 property is…show more content…
Ase mentioned earlier, Section 280F(d)(4) clearly identifies Calvin's computer as listed property. Section 280F(d)(3)(A) addresses the employee use of listed property. “In general. Any employee use of listed property shall not be treated as use in a trade or business for purposes of determining the amount of any depreciation deduction allowable to the employee (or the amount of any deduction allowable to the employee for rentals or other payments under a lease of listed property) unless such use is for the convenience of the employer and required as a condition of employment.” Since Calvin's employer, Diversified Investments, did not require him to buy the computer, the computer was not required as a condition of employment. Since the computer is listed property that is not for the convenience of the employer and required as a condition of employment, employee use of the computer is not considered as use in trade or business. Since the computer is not considered to be in business use, it is considered to be a personal use asset. Section 262 addresses personal expenses such as Calvin’s laptop. It says “Except as otherwise expressly provided in this chapter, no deduction shall be allowed for personal, living, or family expenses.” Nowhere in the chapter does it expressly provide that a notebook computer and peripheral equipment may be
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