Reg. § 1.179-4 Definitions.
The following definitions apply for purposes of section and through :
(a) Section 179 property The term section property means any tangible property described in section that is acquired by purchase for use in the active conduct of the taxpayer's trade or business (as described in ). For taxable years beginning after 2002 and before 2008, the term section property includes computer software described in section that is placed in service by the taxpayer in a taxable year beginning after 2002 and before 2008 and is acquired by purchase for use in the active conduct of the taxpayer's trade or business (as described in 1.179-2(c)(6)). For purposes of this , the term trade or business has the same meaning as in section and the regulations under section .
(b) Section 38 property The term section property shall have the same meaning assigned to it in section and the regulations thereunder.
(c) Purchase
(1)
(i) Except as otherwise provided in of this section, the term purchase means any acquisition of the property, but only if all the requirements of , , and of this section are satisfied.
(ii) Property is not acquired by purchase if it is acquired from a person whose relationship to the person acquiring it would result in the disallowance of losses under section or . The property is considered not acquired by purchase only to the extent that losses would be disallowed under section or . Thus, for example, if property is purchased by a husband and wife jointly from the husband's father, the property will be treated as not acquired by purchase only to the extent of the husband's interest in the property. However, in applying the rules of section (b) and (c) for this purpose, section shall be treated as providing that the family of an individual will include only his spouse, ancestors, and lineal descendants. For example, a purchase of property from a corporation by a taxpayer who owns, directly or indirectly, more than 50 percent in value of the outstanding stock of such corporation does not qualify as a purchase under section ; nor does the purchase of property by a husband from his wife. However, the purchase of section property by a taxpayer from his brother or sister does qualify as a purchase for purposes of section .
(iii) The property is not acquired by purchase if acquired from a component member of a controlled group of corporations (as defined in of this section) by another component member of the same group.
(iv) The property is not acquired by purchase if the basis of the property in the hands of the person acquiring it is determined in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, is determined under section , relating to property acquired from a decedent, or is determined under section , relating to property acquired from certain decedents who died in 2010. For example, property acquired by gift or bequest does not qualify as property acquired by purchase for purposes of section ; nor does property received in a corporate distribution the basis of which is determined under section , property acquired by a corporation in a transaction to which section applies, property acquired by a partnership through contribution (section ), or property received in a partnership distribution which has a carryover basis under section .
(2) Property deemed to have been acquired by a new target corporation as a result of a section election (relating to certain stock purchases treated as asset acquisitions) or a section election (relating to certain stock dispositions treated as asset transfers) made for a disposition described in will be considered acquired by purchase.
(d) Cost The cost of section 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 taxpayer. For example, X Corporation purchases a new drill press costing $10,000 in November 1984 which qualifies as section property, and is granted a trade-in allowance of $2,000 on its old drill press. The old drill press had a basis of $1,200. Under the provisions of sections and , the basis of the new drill press is $9,200 ($1,200 basis of oil drill press plus cash expended of $8,000). However, only $8,000 of the basis of the new drill press qualifies as cost for purposes of the section expense deduction; the remaining $1,200 is not part of the cost because it is determined by reference to the basis of the old drill press.
(e) Placed in service The term placed in service means the time that property is first placed by the taxpayer in a condition or state of readiness and availability for a specifically assigned function, whether for use in a trade or business, for the production of income, in a tax-exempt activity, or in a personal activity. See for examples regarding when property shall be considered in a condition or state of readiness and availability for a specifically assigned function.
(f) Controlled group of corporations and component member of controlled group The terms controlled group of corporations and component member of a controlled group of corporations shall have the same meaning assigned to those terms in section (a) and (b), except that the phrase “more than 50 percent” shall be substituted for the phrase “at least 80 percent” each place it appears in section .
[T.D. 8121, 52 FR 413, Jan. 6, 1987. Redesignated by T.D. 8455, 57 FR 61321, 61323, Dec. 24, 1992, as amended by T.D. 9146, 69 FR 46984, Aug. 4, 2004; T.D. 9209, 70 FR 40191, July 13, 2005; T.D. 9811, 82 FR 6236, Jan. 19, 2016; T.D. 9874, 84 FR 50149, Sept. 24, 2019]