Expert: OWEN S. ARNOFF, EA - 10/29/2009

Question
QUESTION: Im looking to buy a computer in order to research and trade more easily. I recently set myself up with a limited partnership where i am the only member managing my own money. Can i offset some invetment gains with the purchase of a computer? If I can't expense the entire computer, can i depreciate it over a few years against my investments? I have a personal computer for other things, this would simply be for invetments. Thank you.

ANSWER: Bill:

If you are in the business of trading (or your LP is in the business of trading) and it is a regular occupation or purpose, then you could certainly deduct the cost of the computer (as you indicate it will be exclusively used for business purposes).  You can do that over time according to a fixed depreciation schedule or (assuming you qualify) could deduct the cost as a Section 179 deduction.

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With every kind wish,


Owen Arnoff, EA
Admitted to Practice Before the Internal Revenue Service
Better Business Ventures, Inc.
916-481-5252

Please note: This advice was prepared based on our understanding of the tax law in effect at the time it was written as it applies to the facts that you provided.  

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---------- FOLLOW-UP ----------

QUESTION: I should have clarrified. I have a regular day job in the insurance industry. I set up the LP in order to more easily track my performance when i go to apply for graduate school. The LP's sole purpose is trading stocks and bonds. I do not have the FINRA series liscences; therefore, i do not manage other people's money...only my own. Does this change anything?


Answer
In that case, Bill, you are limited in your deduction.  Your deduction would come in on Schedule A as a miscellaneous itemized deduction, subject to the 2% AGI limitation.  The same rules for depreciation would come into play, except for the 179 deduction.  It seems like you probably wouldn't have much of a deduction, if at all, depending upon your AGI.

Owen S. Arnoff, EA