 So, qualified section 179, real property. So you can elect to create certain qualified real property you place in service during the tax year as section 179 property. If this election is made, the term, quote, section 179 property, end quote, will include any qualified real property, we're talking like real estate here generally, that is qualified improvement property as described in section 168 E6 of the internal revenue code and any of the following improvements to non-residential real property placed in service after the date the non-residential real property was first placed in service. So number one, roofs. Number two, heating, ventilation and air conditioning property. Number three, fire protection and alarm systems. Number four, security systems. Property acquired for business use. So to qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. That's kind of a general rule for deductions, business related deductions is generally what we're thinking of and remember, that's the natural kind of thought process we would think of in an income tax system, what kinds of things should we be able to deduct those things we had to consume in order to generate revenue. So property you acquired only for the production of income such as investment property, rental property, if routine property is not your trade or business and property that produces royalties does not qualify. In other words, you kind of have this idea of when you're trying to generate income, is it property that you're just sitting on that's gonna basically appreciate in value or are you kind of actively involved in the property? This is one of the issues that sometimes come up with some of the rules that are gonna be applied. So if you're talking like something that's reported on a schedule C for example, you have a sole proprietorship and the general idea would be you're actively involved in the sole proprietorship, you're subject to self-employment tax, I'll relate it to it and so on. But if you buy property that you're just holding onto and hoping it appreciates in value and you're not actively kind of involved in it, that would be kind of thought of more as a passive type of investment situation. And sometimes there's a distinction in the tax code for those types, different types of holding. So once again, property you acquire, property you acquire only for the production of income such as investment property. So you're investing in it and you're just kind of holding onto it, waiting for it to go up in value, rental property. So rental property has another issue that's why it's not reported on the schedule C oftentimes unless it's like a principal business and you're actively involved, but rather on a schedule E because you may not be subject to self-employment tax because you're not actively involved in whatnot. However, you could have passive income rules and whatnot related to it. So if renting property is not your trader or business, that's why that exception is there and property that produces royalties does not qualify. So partial business use. When you use property for both business and non-business purposes, you can elect the 179 deduction only if you use the property more than 50% for business in the year you place it in service. So you have to clear that threshold before you can take the 179 deduction. If you use the property more than 50% for business multiply the cost of the property by the percentage of business use, use the resulting business cost to figure your section 179 deduction. So now you're gonna have to think about, you know, what the use is, a percentage usage that is business versus professional so you can properly calculate the 179 as well as the normal depreciation. Typically you would think. So example, May Oak bought and placed in service an item of 179 property costing $11,000. May use the property 80% for business and 20% for personal use. The business part of the cost of the property is 80% of the cost 11,000, which is 8,800. So property acquired by purchase. So this was another requirement we had. We're going through all these requirements. So to qualify for section 179 deduction, your property must have been acquired by purchase. For example, property acquired by gift or inheritance does not qualify. So obviously the idea here is you're getting the property and you're getting this massive upfront deduction for it. So if you just got a gift of the property then you still have this question of basis like what's gonna be the cost of the property but it does seem kind of inappropriate possibly to get this massive deduction in the first year if you were gifted it or if you have basically inherited it at that point in time. Although again, we still have this basis kind of issue for normal depreciation or capital gain or loss if you were to sell the property in the future. So meaning obviously if you pay for the property you know what the cost was because you pay for it in a market transaction. If it was gifted for you then what are you gonna put it on the books as? You would like to put it on the books at the highest basis possible because that allows you possibly depreciation if not 179 deduction in the future and when you sell the property it will lower the amount of gain or increase the amount of loss at that point in time. But usually you would think at a gift you might have to take on the basis of the person that gifted it to you and that person might have bought the property way far back in history which means they might have a fairly low basis which usually isn't as good. In an inheritance if someone dies and give you the property because their inheritance may be subject to like a state tax then it might be taxed when the person dies if they're wealthy and individual and at that point if they inherited it to you you might get a step up in basis is what they call it. So now you might be able to put it on the books at a higher base. So you can get into that there's a whole nother kind of issue but you can't do the 179 so you have to buy it for 179. Property is not considered acquired by purchase in the following situations. One, it is acquired by one component member of a controlled group from another component member of the same group. Two, its basis is determined either A in whole or in part by its adjusted basis in the hands of the person from whom it was acquired you would think that might be the case in the case of a gift this first one seems kind of like it's a related party transaction kind of thing which means it might not be an arms length transaction type of thing. That's why that's an issue because it may not be a market transaction as my interpretation at least. B, under the stepped up basis rules for property acquired from a descendant. So that sounds like an inheritance situation where you got a stepped up basis but you didn't buy it. Generally three, it's acquired from a related person. So now you've got this related person thing which means that it might not be a market transaction. So one in three looks similar. Number one says it is acquired by one component member of a controlled group from another component member of the same group.