Question

Required information (The following information applies to the questions displayed below.] AMP Corporation calendar-year-end) has 2019 taxable income of $1,900.000 for purposes of computing the $179 expense. During 2019, AMP acquired the following assets: (Use MACRS Table 1. Table 2. Table 3. Table 4 and Table 5.) Asset Machinery Computer equipment Office building Total Placed in Service September 12 February 10 April 2 Basis $1,368,000 480,000 515,000 $ 2,275,600 a. What is the maximum amount of $179 expense AMP may deduct for 2019? Answer is complete but not entirely correct. Maximum $179 expense deductible $ 2.275,000

Answer 1

ANSWER

Qualified property for Section 179 expense includes all new or used business equipment placed during tax year 2019. The list of qualifying equipment include both machinery and computer equipment. Office building does not qualify for Section 179 expense.

Section 179 expense comes with certain limits. The new rates has been kept in Year 2019 and slightly increased from tax year 2018. The caps to the total amount written off is $1,020,000. The limit for year 2019 is $ 2,550,000. The deduction starts to phase out on dollar to dollar basis after $ 2,550,000 is spent by the business.

Description	Amount	Explanation
A. Qualified Property placed in 2019 i.e. machinery and computer equipment	$ 1,360,000+ 400,000 = $ 1,760,000	Total section 179 qualified property
B,Limit for Section 179 phase-out	($ 2,550,000)	Limit for 2019
C. Phase out of maximum 179 expense	$ 0	A – B = permanently disallowed. It cannot be less than $ 0
D. maximum 179 before phase out	$ 1,020,000
E. Phase out of maximum 179 expense	$ 0	From C.
Maximum 179 expense after phase out	$ 1,020,000	D – E

Hence, the maximum amount of Section 179 expense AMP may deduct for Year 2019 is $ 1,020,000.

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