Assume that TDW Corporation (calendar-year-end) has 2019 taxable income of $694,000 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.)
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?
| Placed in | |||
| Asset | Service | Basis | |
| Machinery | September 12 | $ | 2,275,500 |
| Computer equipment | February 10 | 270,150 | |
| Furniture | April 2 | 889,350 | |
| Total | $ | 3,435,000 |
Part A
|
Maximum depreciation expense |
$65000 |
|
Description |
Amount |
Explanation |
|
(1) Property placed in service in 2019 |
3435000 |
Total qualified property |
|
(2) Threshold for §179 phase-out |
2500000 |
2019 amount [§179(b)(2)] |
|
(3) Phase-out of maximum §179 expense |
935000 |
(1) – (2) (permanently disallowed) |
|
(4) Maximum 179 expense before phase-out |
1000000 |
2019 amount [§179(b)(1)] |
|
(5) Phase-out of maximum §179 expense |
935000 |
From (3) |
|
(6) Maximum §179 expense after phase-out |
$65000 |
(4) – (5) |
Part B
|
Maximum depreciation expense |
$555047 |
|
Description |
Amount |
Explanation |
|
Description |
Amount |
Explanation |
|
(1) Property placed in service in 2019 |
3435000 |
Total qualified property |
|
(2) Threshold for §179 phase-out |
2500000 |
2019 amount [§179(b)(2)] |
|
(3) Phase-out of maximum §179 expense |
935000 |
(1) – (2) (permanently disallowed) |
|
(4) Maximum 179 expense before phase-out |
1000000 |
2019 amount [§179(b)(1)] |
|
(5) Phase-out of maximum §179 expense |
935000 |
From (3) |
|
Asset |
Original Basis |
§179Expense |
Remaining Basis |
Rate |
Depreciation Expense |
|
Machinery (7-year) |
2275500 |
65000 |
2210500 |
10.71% |
236745 |
|
Computer Equipment (5- year) |
270150 |
270150 |
35.00% |
94553 |
|
|
Furniture (7 year) |
889350 |
889350 |
17.85% |
158749 |
|
|
§179 Expense |
65000 |
||||
|
Total cost recovery |
$555047 |
Therefore,
Maximum depreciation expense = $555047
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