Question

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.)

	Placed in
Asset	Service		Basis
Machinery	September 12	$	1,340,000
Computer equipment	February 10		390,000
Office building	April 2		505,000
Total		$	2,235,000

b. What is the maximum total depreciation, including §179 expense, that AMP may deduct in 2019 on the assets it placed in service in 2019, assuming no bonus depreciation? (Round your intermediate calculations to the nearest whole dollar amount.)

Answer 1

The value of maximum total depreciation, including §179 expense is determined as below:

Asset	MACRS Life	Original Basis (A)	Section 179 Expense (B)	Remaining Basis (A-B)	Rate	Depreciation Expense
Machinery	7-Year	1,340,000	1,000,000	340,000	14.29%	48,586 (340,000*14.29%)
Computer Equipment	5-Year	390,000		390,000	20.00%	78,000 (390,000*20%)
Office Building	39-Year	505,000		505,000	1.819%	9,186 (505,000*1.82%)
						135,772 (Rounded Off)
Section 179 Expense						1,000,000
Total Cost Recovery						$1,135,772

Answer is $1,135,772.

_____

Notes:

1)

The value of $1,000,000 maximum section 179 expense is arrived as follows:

Total Section 179 Expense Qualified Property (1,340,000+390,000)	1,730,000
Threshold for Phaseout for 2019 as Per Applicable Rules	-2,500,000
Phase-Out of Maximum Section 179 Expense (Permanently Disallowed)	0
Maximum Section 179 Expense Before Phase-Out	1,000,000
Phase-Out of Maximum Section 179 Expense (from above)	0
Maximum Section 179 Expense After Phase-Out	$1,000,000

2) In order to avail the maximum depreciation expense, Section 179 expense is applied against the 7-Year property (which is Machinery).

3) Depreciation rates have been taken from the MACRS table (Year 1) for different types of property/assets acquired during the year.