Small Office Home Office (SOHO) Tax Tips

What Do Title 11, Chapter 7, Section 179, and Pub 17 Really Mean?

Aug 27, 2009 Tax Management, Tax Strategies

All the permanent federal laws of the United States called the US Code (USC) are organized into 50 books or “Titles”. Each Title or book is further subdivided into chapters and sections. The Internal Revenue Code is in the 26th book hence it is alternatively known as Title 26 of the US Code. Legal “stuff” pertaining to bankruptcy is found in the 11th book of the US Code, hence Title 11. Provisions, for example, of the specific part of the US bankruptcy law that pertain to individual reorganization of debt are described in Chapter 13 of Title 11, USC. Similarly, Chapter 7 of Title 11 of the USC describes the process of liquidation of assets under straight bankruptcy; Chapter 11, (typical) business reorganization, Chapter 12, family farmer reorganization.

In a different example, Section 179 of the US Internal Revenue Code (26 USC § 179) is a provision in the tax code that allows a taxpayer to choose whether or not to deduct the cost of some qualified asset from their taxable income as an expense rather than capitalize and depreciate it over time. Thus, an accountant or tax preparer determines whether a Section 179 election (the choice whether or not to “expense now” rather than recover the cost of property more slowly over a period time) is advantageous to a taxpayer when, for example, equipment is purchased. Even in a financial context, the conversational reference to a “179″, “Pub 17″, or “Chapter 7″, is usually unintelligible to the “average” taxpayer. It is however, a very clear and unambiguous way to describe a tax-related circumstance especially when requirements, limitations, and exceptions specified in the Tax Code are thoroughly understood and appropriately applied to the subject under discussion.

As a further aside, tax professionals often cite definitions from official Internal Revenue Service (hereinafter IRS) publications or pubs rather than from the actual Tax Code as a reference. Thus, in the context of property depreciation, Publication 946 – How to Depreciate Property provides an overview and specifics regarding Section 179 and related topics. Similarly Publication 17 – Your 2008 Federal Income Tax provides an overview for the filing of individual income tax in 2008. Each year a new “pub 17″ is printed by the IRS. These “pubs” explain the actual Tax Code. They are prepared by the IRS in order to provide the “average taxpayer” with both commentary and applied examples of particular tax codes in question. Whenever using an IRS publication, make certain it is the most current version (revision date) available; new tax year information is usually printed toward the end of every calendar year around November and December. These pubs and other documentation are revised on a regular basis and are available for free to the public. You can request that a paper version of an IRS publication be mailed to you by contacting the IRS by phone 800-TAX-FORMS (1-800-829-3676) or online at the IRS website, irs.gov under the /formspub/ subdirectory.