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	$	1,550,000
Computer equipment	February 10		365,000
Office building	April 2		480,000
Total		$	2,395,000

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

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?

Answer 1

Part A

Maximum 179 expense deductible

$1000000

	amount	explanation
1. property place in service in 2019	2395000	total 179 qualified property
2. threashold for 179 phase-out	2500000	2019 amount (179 b(2)
3. phase out of maximum 179 expense	0	(1-2)(permanently disallowed), not less than 0
4. maximum 179 expense before phase out	1000000	2019 amount 179b(1)
5. phase out of maximum 179 expense	0	from 3
Maximum 179 expense after phase out	1000000	(4-5)

Part B

Maximum depreciation expense

$1160326

Asset	Original Basis	§179 Expense	Remaining Basis	Rate	Depreciation Expense
Machinery (7-year)	1550000	1000000	550000	14.29%	78595
Computer Equipment (5- year)	365000		365000	20.00%	73000
Office building (39 year)	480000		480000	1.819%	8731
§179 Expense					1000000
Total cost recovery					1160326