Question

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Assume that TDW Corporation (calendar-year-end) has 2019 taxable income of $674,000 for purposes of computing the §179 expense. The company acquired the following assets during 2019: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

	Placed in
Asset	Service		Basis
Machinery	September 12	$	2,273,000
Computer equipment	February 10		266,900
Furniture	April 2		885,100
Total		$	3,425,000

a. What is the maximum amount of §179 expense TDW may deduct for 2019?

b. What is the maximum total depreciation, including §179 expense, that TDW 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

Part A

Maximum depreciation expense

$75000

Description	Amount	Explanation
(1) Property placed in service in 2019	3425000	Total qualified property
(2) Threshold for §179 phase-out	2500000	2019 amount [§179(b)(2)]
(3) Phase-out of maximum §179 expense	925000	(1) – (2) (permanently disallowed)
(4) Maximum 179 expense before phase-out	1000000	2019 amount [§179(b)(1)]
(5) Phase-out of maximum §179 expense	925000	From (3)
(6) Maximum §179 expense after phase-out	$75000	(4) – (5)

Part B

Maximum depreciation expense

$561811

Description	Amount	Explanation
(1) Property placed in service in 2019	3425000	Total qualified property
(2) Threshold for §179 phase-out	2500000	2019 amount [§179(b)(2)]
(3) Phase-out of maximum §179 expense	925000	(1) – (2) (permanently disallowed)
(4) Maximum 179 expense before phase-out	1000000	2019 amount [§179(b)(1)]
(5) Phase-out of maximum §179 expense	925000	From (3)
(6) Maximum §179 expense after phase-out	$75000	(4) – (5)

Asset	Original Basis	§179Expense	Remaining Basis	Rate	Depreciation Expense
Machinery (7-year)	2273000	75000	2198000	10.71%	235406
Computer Equipment (5- year)	266900		266900	35.00%	93415
Furniture (7 year)	885100		885100	17.85%	157990
§179 Expense					75000
Total cost recovery	$561811

Therefore,

Maximum depreciation expense = $561811