Question

Question 10 O out of 2 points Chat Corporation has table income in 2020 of 5312,000 for purposes of computing the 5179 expense and acquired the following assets during the year: Asset Placed in Service Basis Office furniture 5780,000 990,000 Computer equipment Delivery truck Qualified improvement property Total September 12 February 10 August 21 September 30 68,000 1.499.000 $3.268.000 What is the maimum total depreciation that Chat may deductin 20207 Selected Answer INore Giver Question 11 O out of 2 points Acorn Construction calendar year and corporation has had rapid expansion during the last half of the current year due to the housing market's recovery. The company has $5.000.000 of taxable income before the cost recovery deduction and would like to maximize its cost recovery deduction for the current year. Acorn provided the following information Assets Placed in Service Basis $1,750,000 August 20 October 17 New Equipment and Tools Used Light Duy Trucks Used Machinery Total November 6 1,500,000 525.000 51.775.000 The used assets had been contributed to the business by its owner in a nontcable transaction. What is Acorn's mamum cost recovery expense in the current year? Selected Answer 2125023

Answer 1

Q.10.

Description	Amount	Explanation
(1) Property placed in service in 2020	3268000	Total qualified property
(2) Threshold for §179 phase-out	2500000	2020 amount [§179(b)(2)]
(3) Phase-out of maximum §179 expense	768000	(1) – (2) (permanently disallowed)
(4) Maximum 179 expense before phase-out	1000000	2020 amount [§179(b)(1)]
(5) Phase-out of maximum §179 expense	768000	From (3)
(6) Maximum §179 expense after phase-out	$232000	(4) – (5)

Asset	Original Basis	§179Expense	Remaining Basis	Rate	Depreciation Expense
furniture (7-year)	780000		780000	14.29%	111462
Computer Equipment (5- year)	930000		930000	20.00%	186000
truck(5 year) qualified property(39)	68000 1490000	232000	68000 1258000	20.00% 0.75%	13600 9435
§179 Expense					232000
Total cost recovery	$552497

Therefore,

Maximum depreciation expense = $552497

Q.11

CALACULATION OF ACRON's MAXIMUM COST RECOVERY EXPENSE IN THE CURRENT YEAR :

Asset	Original Basis	Bonus Depreciation	Remaining Basis	MACRS Rate	Depreciation Deduction
New Equipment and tools	$1750000	$1750000	$0	14.29%	$0
Used Light duty trucks	$1500000	$0	$1500000	20%	$300000
Used Machinery	$525000	$0	$525000	14.29%	$75023
Bonus Depreciation					$1750000
Total					$2125023.

- The total cost recovery deduction is the total depreciation deduction i.e., $2125023.

- Acorn construction company is eligible for 100% bonus depreciation on its newly purchased asset (new equipment and tools).

- The company is not eligible for 100% bonus depreciation on its existing assets as they have been already taken and used by the company

- And, Acorn Company is not eligible for sec. 179 expense deductions as the newly purchased asset get into exist and the assets exceed the threshold limit of $2500000 by more than $1000000.