Question

Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2017. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2017:

Asset	Cost		Date Placed in Service
Office furniture	$	150,000	02/03/2017
Machinery		1,560,000	07/22/2017
Used delivery truck*		40,000	08/17/2017

*Not considered a luxury automobile.

During 2017, Karane was very successful (and had no §179 limitations) and decided to acquire more assets this next year to increase its production capacity. These are the assets acquired during 2018:

Asset	Cost		Date Placed in Service
Computers & info. system	$	400,000	03/31/2018
Luxury auto†		80,000	05/26/2018
Assembly equipment		1,200,000	08/15/2018
Storage building		700,000	11/13/2018

†Used 100% for business purposes.

Karane generated taxable income in 2018 of $1,732,500 for purposes of computing the §179 expense. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) Assume the 2017 §179 limits are the same as those in 2018. (Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers.)

rev: 09_14_2018_QC_CS-135704

Compute the maximum 2018 depreciation deductions including §179 expense (ignoring bonus depreciation).

Answer 1

ANSWER:

Given that karane enterprise a calendar year manufacturer based in college station texas began business in 2017.

(b)

As per IRS effective for tax years beginning January 3,2018 business can immediately deduct upto $ 1 million for qualifying purchases of capital property with a limit of $ 2.5 million

For luxury auto, first year depreciation & fixed at $10000

Asset	Amount	Sec 179	% rate of depreciation	Depreciation	Total expense
Computers	400000	290000	20%	22000 (110000*20%)	312000
Luxury auto	80000	10000	-	-	10000
Assembly equipment	1200000	-	20%	240000 (1200000*20%)	240000
Storage building	700000	700000	-	-	700000
Total	2380000	1000000