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From: smith@umn-cs.UUCP
Newsgroups: net.taxes
Subject: Re: Deduction questions... - (nf)
Message-ID: <271@umn-cs.UUCP>
Date: Sun, 5-Jun-83 21:19:31 EDT
Article-I.D.: umn-cs.271
Posted: Sun Jun  5 21:19:31 1983
Date-Received: Tue, 7-Jun-83 21:55:38 EDT
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#R:ihuxx:-31400:umn-cs:10500004:000:1388
umn-cs!smith    Jan 20 13:04:00 1983



  When I first approached the problem a few years ago I looked very carefully
into deducting the computer cost as an "educational expense" as mentioned in
your Case I.  Superficially it sounds like a good idea, but the books made me
doubt its validity as a deduction.  The IRS sets great store by the phrase
"ordinary and necessary" and few people have gotten away with deducting 
expenses other than tuition, books, paper supplies, and maybe transportation.
Maybe the new wave of purchase requirements by colleges will someday change
this, but it's hard to tell.  It would be interesting to know if, for
instance, the IRS sees a typewriter as a "necesary" college expense.

  I used your Case II (deduct depreciated cost) and took it as a business
expense ("calculating equipment used for professional purposes").  Ditto
for the investment tax credit.  Since then I've had consulting work and have
deducted depreciation from Schedule C.

  I'm getting more equipment this year and plan to just write it all off
using your Case III.  I haven't really read the new rules, but what I have
heard makes me think it will apply.

  The only weird issue I know of here is that of proving to the IRS that
you're really in business.  Things get pretty sticky if your hardware
costs exceed your income, and do so regularly.  That's the only advantage
I can see to depreciating these days.

Rick.