Question

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Dain’s Diamond Bit Drilling purchased the following assets this year.

	Purchase	Original
Asset	Date	Basis
Drill bits (5-year)	Jan-13	$	130,500
Drill bits (5-year)	Sep-01		149,750
Commercial building	May-27		234,000

Assume its taxable income for the year was $61,500 for purposes of computing the §179 expense (assume no bonus depreciation). (Use MACRS Table 1, Table 2, Table 3, Table 4and Table 5.) (Leave no answer blank. Enter zero if applicable.)

a. What is the maximum amount of §179 expense Dain may deduct for the year?

Answer 1

maximum amount of §179 expense Dain may deduct for the year = $61500

Description	Amount	Explanation
(1) Property placed in service	280250	Total of qualifying assets
(2) Threshold for §179 phase-out	(2500000)	2018 amount [§179(b)(2)]
(3) Phase-out of maximum §179 expense	0	(1) – (2) (permanently disallowed)
(4) Maximum 179 expense before phase-out	1000000	2018 amount [§179(b)(1)]
(5) Phase-out of maximum §179 expense	0	From (3)
(6) Maximum §179 expense after phase-out	1000000	(4) – (5), not limited by taxable income
(7) Taxable income before §179 deduction	61500
Maximum §179 after taxable income limitation	61500	Lesser of (6) and (7)