Section 179 as included in the IRC facilitates the provision of deduction guidelines for specific properties. Under the guidelines of the IRC, the maximum deduction limits is $500,000. Properties that qualify for deductions ought to be subject to acquisitions meant for business purposes only.
A
B
C
D
E
F
Description
Cost $
Section 179
MACRS Basis
Current MACRS expense
Total Expense $
Office Furniture
150,000
150,000
0
0
150000
Machinery
1,560,000
1365000
195000
27850
1392850
Use Delivery Truck
40,000
0
40000
8000
8000
Totals
The maximum depreciation deductions for the year ending 2017 is $1,550,850
2. Compute the maximum 2018 depreciation deductions including §179 expense
Description
Cost $
Section 179 Expense $
MACRS Basis $
Current MACRS $
Total Expense $
Office Furniture
150, 000
0
0
Machinery
1,560,000
195,000
47,750
47,750
Used Truck
40,000
40,000
12,800
12,800
Computer " Info. System
40,000
25,000
15,000
3000
28,000
Assembly Equipment
1,200,000
1,200,000
0
0
1,200,000
Luxury Auto
80,000
80,000
3160
3160
Storage Building
700,000
700,000
2250
2250
Therefore, the maximum depreciation value in 2018 is $1, 266,000
Compute the maximum 2018 depreciation deductions including §179 expense, but now assume that Karane would like to take bonus depreciation.
Description
Cost $
Section 179 Expense $
MACRS Basis $
Current MACRS $
Bonus $
Total Expense $
Office Furniture
150, 000
Machinery
1,560, 000
195, 000
47, 750
47, 750
Used Truck
40, 000
40, 000
12, 800
12, 800
Computer " Info. System
40, 000
25, 000
7, 500
1, 500
7, 500
34, 000
Assembly Equipment
1,200,000
1,200,000
1,200,000
Luxury Auto
80,000
72, 000
3,150
8000
11,150
Storage Building
700, 000
700,000
2250
By taking up bonus depreciation, Karanes’ maximum depreciation would stand at $1,305,700
Now assume that during 2018, Karane decides to buy a competitor’s assets for a purchase price of $1,350,000. Compute the maximum 2018 cost recovery including §179 expense and bonus depreciation.
Description
Cost $
Section 179 Expense $
MACRS Basis $
Current MACRS $
Total Expense $
Office Furniture
150, 000
0
0
Machinery
1,560,000
195,000
47,750
47,750
Used Truck
40,000
40,000
12,800
12,800
Computer " Info. System
40,000
25,000
15,000
3000
28,000
Assembly Equipment
1,200,000
1,200,000
0
0
1,200,000
Luxury Auto
80,000
80,000
3160
3160
Storage Building
700,000
700,000
2250
2250
Inventory
220,000
Office Furniture
230,000
191,000
38,300
5,500
234,500
Machinery
250,000
250,000
35,750
35,750
Patent
198,000
198,000
4,400
4,400
Goodwill
2,000
2,000
45
45
Building
430,000
430,000
3,250
3250
Land
20,000
The maximum 2018 cost recovery including §179 expense and bonus depreciation is equivalent to $1, 571, 900
