Elegant? Why not Linq it.
public static IEnumerable<IEnumerable<T>> SubSetsOf<T>(IEnumerable<T> source)
{
if (!source.Any())
return Enumerable.Repeat(Enumerable.Empty<T>(), 1);
var element = source.Take(1);
var haveNots = SubSetsOf(source.Skip(1));
var haves = haveNots.Select(set => element.Concat(set));
return haves.Concat(haveNots);
}