United States Code

than 60 months (beginning with the first month in such taxable year) as may be selected by the taxpayer in making such election. The expenditures so treated are expenditures properly chargeable to capital account for purposes of section 1016 (a) (1) (relating to adjustments to basis of property).

(b) Trademark and trade name expenditures defined. For purposes of subsection (a), the term "trademark or trade name expenditure" means any expenditure which

(1) is directly connected with the acquisition, protection, expansion, registration (Federal, State, or foreign), or defense of a trademark or trade name;

(2) is chargeable to capital account; and (3) is not part of the consideration paid for a trademark, trade name, or business.

The election provided by subsection (a) shall be made within the time prescribed by law (including extensions thereof) for filing the return for the taxable year during which the expenditure is paid or incurred. The period selected by the taxpayer under subsection (a) with respect to the expenditures paid or incurred during the taxable year which are treated as deferred expenses shall be adhered to in computing his taxable income for the taxable year for which the election is made and all subsequent years.

(d) Cross reference.

For adjustments to basis of property for amounts allowed as deductions for expenditures treated as deferred expenses under this section, see section 1016 (a) (16).

(Added June 29, 1956, ch. 464, § 4 (a), 70 Stat. 406.)

§ 178. Depreciation or amortization of improvements made by lessee on lessor's property.

(a) General rule.

Except as provided in subsection (b), in determining the amount allowable to a lessee as a deduction for any taxable year for exhaustion, wear and tear, obsolescence, or amortization

(1) in respect of any building erected (or other improvement made) on the leased property, if the portion of the term of the lease (excluding any period for which the lease may subsequently be renewed, extended, or continued pursuant to an option exercisable by the lessee) remaining upon the completion of such building or other improvement is less than 60 percent of the useful life of such building or other improvement, or

(2) in respect of any cost of acquiring the lease, if less than 75 percent of such cost is attributable to the portion of the term of the lease (excluding any period for which the lease may subsequently be renewed, extended, or continued pursuant to an option exercisable by the lessee) remaining on the date of its acquisition,

the term of the lease shall be treated as including any period for which the lease may be renewed, extended, or continued pursuant to an option exercisable by the lessee, unless the lessee establishes that (as of the close of the taxable year) it is more probable that the lease will not be renewed, extended, or continued for such period than that the lease will be so renewed, extended, or continued.

(b) Related lessee and lessor. (1) General rule.

If a lessee and lessor are related persons (as determined under paragraph (2)) at any time during the taxable year then, in determining the amount allowable to the lessee as a deduction for such taxable year for exhaustion, wear and tear, obsolescence, or amortization in respect of any building erected (or other improvement made) on the leased property, the lease shall be treated as including a period of not less duration than the remaining useful life of such improvement. (2) Related persons defined.

For purposes of paragraph (1), a lessor and lessee shall be considered to be related persons if

(A) the lessor and the lessee are members of an affiliated group (as defined in section 1504), or

(B) the relationship between the lessor and lessee is one described in subsection (b) of section 267, except that, for purposes of this subparagraph, the phrase "80 percent or more" shall be substituted for the phrase "more than 50 percent" each place it appears in such subsection.

For purposes of determining the ownership of stock in applying subparagraph (B), the rules of subsection (c) of section 267 shall apply, except that the family of an individual shall include only his spouse, ancestors, and lineal descendants. (c) Reasonable certainty test.

In any case in which neither subsection (a) nor subsection (b) applies, the determination as to the amount allowable to a lessee as a deduction for any taxable year for exhaustion, wear and tear, obsolescence, or amortization—

(1) in respect of any building erected (or other improvement made) on the leased property, or (2) in respect of any cost of acquiring the lease,

shall be made with reference to the term of the lease (excluding any period for which the lease may subsequently be renewed, extended, or continued pursuant to an option exercisable by the lessee), unless the lease has been renewed, extended, or continued or the facts show with reasonable certainty that the lease will be renewed, extended, or continued. (Added Pub. L. 85-866, title I, § 15 (a), Sept. 2, 1958, 72 Stat. 1612.)

EFFECTIVE DATE

Section 15 (c) of Pub. L. 85-866 provided that: "The amendments made by this section [which added this section and amended analysis preceding section 161 of this title] shall apply with respect to costs of acquiring a lease incurred, and improvements begun, after July 28, 1958 (other than improvements which, on July 28, 1958, and at all times thereafter, the lessee was under a binding legal obligation to make)."

§ 179. Additional first-year depreciation allowance for small business.

(a) General rule.

In the case of section 179 property, the term "reasonable allowance" as used in section 167 (a) may, at the election of the taxpayer, include an allowance, for the first taxable year for which a deduction

is allowable under section 167 to the taxpayer with respect to such property, of 20 percent of the cost of such property.

(b) Dollar limitation.

If in any one taxable year the cost of section 179 property with respect to which the taxpayer may elect an allowance under subsection (a) for such taxable year exceeds $10,000, then subsection (a) shall apply with respect to those items selected by the taxpayer, but only to the extent of an aggregate cost of $10,000. In the case of a husband and wife who file a joint return under section 6013 for the taxable year, the limitation under the preceding sentence shall be $20,000 in lieu of $10,000. (c) Election.

(1) In general.

The election under this section for any taxable year shall be made within the time prescribed by law (including extensions thereof) for filing the return for such taxable year. The election shall be made in such manner as the Secretary or his delegate may by regulations prescribe.

(2) Election irrevocable.

Any election made under this section may not be revoked except with the consent of the Secretary or his delegate.

(d) Definitions and special rules.

(1) Section 179 property.

For purposes of this section, the term "section 179 property" means tangible personal property(A) of a character subject to the allowance for depreciation under section 167,

(B) acquired by purchase after December 31, 1957, for use in a trade or busiess or for holding for production of income, and

For purposes of paragraph (1), the term "purchase" means any acquisition of property, but only if

(A) the property is not acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under section 267 or 707 (b) (but, in applying section 267 (b) and (c) for purposes of this section, paragraph (4) of section 267 (c) shall be treated as providing that the family of an individual shall include only his spouse, ancestors, and lineal descendants),

(B) the property is not acquired by one member of an affiliated group from another member of the same affiliated group, and

(C) the basis of the property in the hands of the person acquiring it is not determined(i) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or

(ii) under section 1014 (a) (relating to property acquired from a decedent).

(3) Cost.

For purposes of this section, the cost of property does not include so much of the basis of such property as is determined by reference to the

basis of other property held at any time by the person acquiring such property.

(4) Section not to apply to trusts.

This section shall not apply to trusts. (5) Estates.

In the case of an estate, any amount apportioned to an heir, legatee, or devisee under section 167(h) shall not be taken into account in applying subsection (b) of this section to section 179 property of such heir, legatee, or devisee not held by such estate.

(6) Dollar limitation of affiliated group.

For purposes of subsection (b) of this section(A) all members of an affiliated group shall be treated as one taxpayer, and

(B) the Secretary or his delegate shall apportion the dollar limitation contained in such subsection (b) among the members of such affiliated group in such manner as he shall by regulations prescribe.

(7) Affiliated group defined.

For purposes of paragraphs (2) and (6), the term "affiliated group" has the meaning assigned to it by section 1504, except that, for such purposes, the phrase "more than 50 percent" shall be substituted for the phrase "at least 80 percent❞ each place it appears in section 1504 (a). (8) Adjustment to basis; when made.

In applying section 167(g), the adjustment under section 1016 (a) (2) resulting by reason of an election made under this section with respect to any section 179 property shall be made before any other deduction allowed by section 167 (a) is computed.

(e) Regulations.

The Secretary or his delegate shall prescribe such regulations as may be necessary to carry out the purposes of this section. (Added Pub. L. 85-866, title II, § 204 (a), Sept. 2, 1958, 72 Stat. 1679, and amended Pub. L. 87-834, § 13(c) (2), Oct. 16, 1962, 76 Stat. 1034.)

AMENDMENTS

1962-Subsec. (d) (5). Pub. L. 87-834, § 13(c) (2) (A), substituted "section 167(h)" for "section 167(g)." Subsec. (d) (8). Pub. L. 87-834, § 13 (c) (2) (B), substituted "section 167(g)" for "section 167(f)."

EFFECTIVE DATE OF 1962 AMENDMENT Amendment of subsec. (d) (5), (8) of this section by Pub. L. 87-834 applicable to taxable years beginning after Dec. 31, 1961, and ending after Oct. 16, 1962, see section 13(g) of Pub. L. 87-834, set out as a note under section 1245 of this title.

EFFECTIVE DATE

Section 204 (c) of Pub. L. 85-866 provided that: "“The amendments made by this section [which added this section and amended analysis prec. § 161 of this title] shall apply with respect to taxable years ending after June 30, 1958."

SHORT TITLE

Section as part of the Small Business Tax Revision Act of 1958, see section 201 of Pub. L. 85-866, set out as a note under section 165 of this title.

§ 180. Expenditures by farmers for fertilizer, etc. (a) In general.

A taxpayer engaged in the business of farming may elect to treat as expenses which are not charge

able to capital account expenditures (otherwise chargeable to capital account) which are paid or incurred by him during the taxable year for the purchase or acquisition of fertilizer, lime, ground limestone, marl, or other materials to enrich, neutralize, or condition land used in farming, or for the application of such materials to such land. The expenditures so treated shall be allowed as a deduction.

(b) Land used in farming.

For purposes of subsection (a), the term "land used in farming" means land used (before or simultaneously with the expenditures described in subsection (a)) by the taxpayer or his tenant for the production of crops, fruits, or other agricultural products or for the sustenance of livestock.

The election under subsection (a) for any taxable year shall be made within the time prescribed by law (including extensions thereof) for filing the return for such taxable year. Such election shall be made in such manner as the Secretary or his delegate may by regulations prescribe. Such election may not be revoked except with the consent of the Secretary or his delegate. (Added Pub. L. 86779, § 6(a), Sept. 14, 1960, 74 Stat. 1001.)

EFFECTIVE DATE

Section 6(d) of Pub. L. 86-779 provided that: "The amendments made by subsections (a), (b), and (c) [adding this section and item 180 to table of sections for Part VI and amending section 263 (a)(1) of this title] shall apply to taxable years beginning after December 31, 1959."

§ 181. Repealed. Pub. L. 88-272, title II, § 203(a)(3)(B), Feb. 26, 1964, 78 Stat. 34.

Section, Pub. L. 87-834, § 2(c), Oct. 16, 1962, 76 Stat. 970, related to a deduction for unused investment credit.

EFFECTIVE Date of RepEAL

Repeal of section applicable in case of property placed in service after Dec. 31, 1963, with respect to taxable years ending after such date, and in case of property placed in service before Jan. 1, 1964, with respect to taxable years beginning after Dec. 31, 1963, see section 203 (a) (4) of Pub. L. 88-272, set out as a note under section 48 of this title.

§ 182. Expenditures by farmers for clearing land. (a) In general.

A taxpayer engaged in the business of farming may elect to treat expenditures which are paid or incurred by him during the taxable year in the clearing of land for the purpose of making such land suitable for use in farming as expenses which are not chargeable to capital account. The expenditures so treated shall be allowed as a deduction.

(b) Limitation.

The amount deductible under subsection (a) for any taxable year shall not exceed whichever of the following amounts is the lesser:

(1) $5,000, or

(2) 25 percent of the taxable income derived from farming during the taxable year.

For purposes of paragraph (2), the term "taxable income derived from farming" means the gross in

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come derived from farming reduced by the deductions allowed by this chapter (other than by this section) which are attributable to the business of farming.

For purposes of subsection (a) —

(1) The term "clearing of land" includes (but is not limited to) the eradication of trees, stumps, and brush, the treatment or moving of earth, and the diversion of streams and watercourses.

(2) The term "land suitable for use in farming" means land which as a result of the activities described in paragraph (1) is suitable for use by the taxpayer or his tenant for the production of crops, fruits, or other agricultural products or for the sustenance of livestock.

(d) Exceptions, etc. (1) Exceptions.

The expenditures to which subsection (a) applies shall not include

(A) the purchase, construction, installation, or improvement of structures, appliances, or facilities which are of a character which is subject to the allowance for depreciation provided in section 167, or

(B) any amount paid or incurred which is allowable as a deduction without regard to this section.

(2) Certain property used in the clearing of land. (A) Allowance for depreciation.

The expenditures to which subsection (a) applies shall include a reasonable allowance for depreciation with respect to property of the taxpayer which is used in the clearing of land for the purpose of making such land suitable for use in farming and which, if used in a trade or business, would be property subject to the allowance for depreciation provided by section 167.

(B) Treatment as depreciation deduction.

For purposes of this chapter, any expenditure described in subparagraph (A) shall, to the extent allowed as a deduction under subsection (a), be treated as an amount allowed under section 167 for exhaustion, wear and tear, or obsolescence of the property which is used in the clearing of land.

(e) Election.

EFFECTIVE Date

Section 21(d) of Pub. L. 87-834 provided that: "The armendments made by this section [enacting this section and amending section 263 (a) of this title] shall apply with respect to taxable years beginning after December 31, 1962."

1964-Pub. L. 88-272, title II, § 213(a) (2), Feb. 26, 1964, 78 Stat. 52, redesignated former item 217 as 218, and added item 217.

1962-Pub. L. 87-834, § 28(b), Oct. 16, 1962, 76 Stat. 1068, substituted "Deduction of taxes, interest, and business depreciation by cooperative housing corporation tenant-stockholder" for "Amounts representing taxes and interest paid to cooperative housing corporation" in item 216.

§ 211. Allowance of deductions.

In computing taxable income under section 63 (a), there shall be allowed as deductions the items specified in this part, subject to the exceptions provided in part IX (section 261 and following, relating to items not deductible). (Aug. 16, 1954, ch. 736, 68A Stat. 69.)

§ 212. Expenses for production of income.

In the case of an individual, there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year

§ 213. Medical, dental, etc., expenses.

(a) Allowance of deduction.

There shall be allowed as a deduction the following amounts of the expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent (as defined in section 152):

(1) If neither the taxpayer nor his spouse has attained the age of 65 before the close of the taxable year

(A) the amount of such expenses for the care of any dependent who

(i) is the mother or father of the taxpayer or of his spouse, and

(ii) has attained the age of 65 before the close of the taxable year, and

(B) the amount by which such expenses for the care of the taxpayer, his spouse, and such dependents (other than any dependent described in subparagraph (A)) exceed 3 percent of the adjusted gross income.

(2) If either the taxpayer or his spouse has attained the age of 65 before the close of the taxable year

(A) the amount of such expenses for the care of the taxpayer and his spouse,

(B) the amount of such expenses for the care any dependent described in paragraph (1) (A), and

(C) the amount by which such expenses for the care of such dependents (other than any dependent described in paragraph (1)(A)) exceed 3 percent of the adjusted gross income. (b) Limitation with respect to medicine and drugs.

Amounts paid during the taxable year for medicine and drugs which (but for this subsection) would be taken into account in computing the deduction under subsection (a) shall be taken into account only to the extent that the aggregate of such amounts exceeds 1 percent of the adjusted gross income. The preceding sentence shall not apply to amounts paid for the care of—

(1) the taxpayer and his spouse, if either of them has attained the age of 65 before the close of the taxable year, or

(2) any dependent described in subsection (a) (1) (A).

Except as provided in subsection (g), the deduction under this section shall not exceed $5,000, multiplied by the number of exemptions allowed for the taxable year as a deduction under section 151 (other than exemptions allowed by reason of subsection (c) or (d), relating to additional exemptions for age or blindness); except that the maximum deduction under this section shall be

(1) $10,000, if the taxpayer is single and not the head of a household (as defined in section 1 (b) (2)) and not a surviving spouse (as defined in section 2 (b)) or is married but files a separate return; or

(2) $20,000, if the taxpayer files a joint return with his spouse under section 6013, or is the head of a household (as defined in section 1 (b) (2)) or a surviving spouse (as defined in section 2 (b)). (d) Special rule for decedents.

(1) Treatment of expenses paid after death.

For purposes of subsection (a), expenses for the medical care of the taxpayer which are paid out of his estate during the 1-year period beginning with the day after the date of his death shall be treated as paid by the taxpayer at the time incurred.

(2) Limitation.

Paragraph (1) shall not apply if the amount paid is allowable under section 2053 as a deduction in computing the taxable estate of the decedent, but this paragraph shall not apply if (within the time and in the manner and form prescribed by the Secretary or his delegate) there is filed

(A) a statement that such amount has not been allowed as a deduction under section 2053, and

(B) a waiver of the right to have such amount allowed at any time as a deduction under section 2053.

(e) Definitions.

For purposes of this section

(1) The term "medical care" means amounts paid

(A) for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body (including amounts paid for accident or health insurance), or

(B) for transportation primarily for and essential to medical care referred to in subparagraph (A).

(2) The determination of whether an individual is married at any time during the taxable year shall be made in accordance with the provisions of section 6013 (d) (relating to determination of status as husband and wife).

(f) Exclusion of amounts allowed for care of certain dependents.

Any expense allowed as a deduction under section 214 shall not be treated as an expense paid for medical care.

(g) Maximum limitation if taxpayer or spouse has attained age 65 and is disabled.

(1) Special rule.

Subject to the provisions of paragraph (2), the deduction under this section shall not exceed

(A) $20,000, if the taxpayer has attained the age of 65 before the close of the taxable year and is disabled, or if his spouse has attained the age of 65 before the close of the taxable year and is disabled and if his spouse does not make a separate return for the taxable year, or

(B) $40,000, if both the taxpayer and his spouse have attained the age of 65 before the close of the taxable year and are disabled and if the taxpayer files a joint return with his spouse under section 6013.

(2) Amounts taken into account.
For purposes of paragraph (1) —

(A) amounts paid by the taxpayer during the taxable year for medical care, other than amounts paid for

(i) his medical care, if he has attained the age of 65 before the close of the taxable year and is disabled, or

(ii) the medical care of his spouse, if his spouse has attained the age of 65 before the close of the taxable year and is disabled, shall be taken into account only to the extent that such amounts do not exceed the maximum limitation provided in subsection (c) which would (but for the provisions of this subsection) apply to the taxpayer for the taxable year;

(B) if the taxpayer has attained the age of 65 before the close of the taxable year and is disabled, amounts paid by him during the taxable year for his medical care shall be taken into account only to the extent that such amounts do not exceed $20,000; and

(C) if the spouse of the taxpayer has attained the age of 65 before the close of the taxable year and is disabled, amounts paid by the taxpayer during the taxable year for the medical care of his spouse shall be taken into account only to the extent that such amounts do not exceed $20,000.

(3) Meaning of disabled.

For purposes of paragraph (1), an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. An individual shall not be considered to be disabled unless he furnishes proof of the existence thereof in such form and manner as the Secretary or his delegate may require.

(4) Determination of status.

For purposes of paragraph (1), the determination as to whether the taxpayer or his spouse is disabled shall be made as of the close of the taxable year of the taxpayer, except that if his spouse dies during such taxable year such determination shall be made with respect to his spouse as of the time of such death.

(Aug. 16, 1954, ch. 736, 68A Stat. 69; Sept. 2, 1958, Pub. L. 85-866, title I, §§ 16, 17 (a),(b), 72 Stat. 1613, 1614; May 14, 1960, Pub. L. 86-470, § 3(a), 74 Stat. 133; Oct. 23, 1962, Pub. L. 87-863, § 1 (a), (b), 76 Stat. 1141; Feb. 26, 1964, Pub. L. 88-272, title II, § 211(a), 78 Stat. 49.)

AMENDMENTS

1964 Subsec. (b). Pub. L. 88-272 excluded persons attaining age 65 before the close of the taxable year from the limitation, whether they are the taxpayer and his spouse, or the mother or father of the taxpayer and his spouse.

1962-Subsec. (c). Pub. L. 87-863, § 1(a), substituted "$5,000" for "$2,500", "$10,000" for "$5,000", and "$20,000" for "$10,000."

Subsec. (g). Pub. L. 87-863, § 1(b), substituted "$20,000" for "$15,000" in three instances, and "$40,000" for "$30,000."

1960 Subsec. (a). Pub. L. 86-470 authorized a taxpayer to deduct medical care expenses for dependent parents of the taxpayer or his spouse who have attained the age of 65 before the close of the taxable year without applying the three percent limitation.

1958 Subsec. (c). Pub. L. 85-866, § 17(b), substituted "Except as provided in subsection (g), the" for "The". Subsec. (d) (2) (A). Pub. L. 85-866, § 16, eliminated "claimed or" preceding “allowed".

Subsec. (g). Pub. L. 85-866, § 17(A), added subsec. (g).

EFFECTIVE DATE OF 1964 AMENDMENT

Section 211(b) of Pub. L. 88-272 provided that: "The amendment made by subsection (a) [to subsec (b) of this section] shall apply to taxable years beginning after December 31, 1963."

EFFECTIVE DATE OF 1962 AMENDMENT

Section 1(c) of Pub. L. 87-863 provided that: "The amendments made by subsections (a) and (b) [to subsecs. (c) and (g) of this section] shall apply only with respect to taxable years beginning after December 31, 1961."

EFFECTIVE DATE OF 1960 AMENDMENT

Section 3(b) of Pub. L. 86-470 provided that: "The amendment made by subsection (a) [to subsec. (a) of this section] shall apply to taxable years beginning after December 31, 1959."

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United States Code, Volume 6