Question

Election to Expense Assets (LO. 5) In 2019, Terrell, Inc., purchases machinery costing $2,578,000. Its 2019 taxable income before considering the Section 179 deduction is $1,100,000. Assume that Terrell elects not to claim bonus depreciation. a. Terrell's maximum Section 179 deduction in 2019 is $ х. b. The depreciable basis of the equipment is X . Feedback Check My Work Under this provision, taxpayers are allowed to expense up to $1,020,000 (2019) of the cost of tangible personal Section 179 property used in a trade or business. Amounts expensed under this provision reduce the depreciable basis of the property. The amount of the annual deduction limit is reduced when purchases of qualifying property exceed $2,550,000 in 2019. In addition, the deductible amount cannot exceed the taxable income from the active conduct of all the taxpayer's trade or business activities.

Answer 1

@ · $992,000 Because, Terell acquired over $2,550,000 of qualifying section 179 property, the annual investment limit applies. $ 1820,000 annual deduction is reduced dollar for dollar by the amount of the investment in qualifying property in excess of $ 2,550,000. Terell's' section 179 deduction is reduced by $ 28,000 ($2,578,000 - $2,550,000] and its sec 179 deduction is womited to $ 992000 [$ 1,020,000 – $28,000). The taxable income limit does not affect the amoment of the 2019 section 179 droduction because the $1,100,000. taxable income exceeds the $992,000 maxinum election to expense. the depreciable basis of the equipment is 1, 586,000 578,000 - $992,000). Acquisition cost of the equipment by the amount of the section 179 election for the current year. The ($ 2,578,000 - $992 is reduced by the amount of the