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.)

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. Karane purchased the following assets for the lump-sum purchase price. (Round your final answers to the nearest whole dollar amount.)

Asset	Cost		Date Placed in Service
Inventory	$	220,000	09/15/2018
Office furniture		230,000	09/15/2018
Machinery		250,000	09/15/2018
Patent		198,000	09/15/2018
Goodwill		2,000	09/15/2018
Building		430,000	09/15/2018
Land		20,000	09/15/2018

	Description Cost Sec. 179 Expense Bonus MACRS Basis Current MACRS Depreciation Total Depreciation Deduction 2017 Assets Office furniture Machinery Used delivery truck 2018 Assets Computers & Info. System Luxury Auto Assembly Equipment 0 Storage Building Inventory Office Furniture Machinery Patent Goodwill Building Land 0 Totals