Assume that TDW Corporation (calendar-year-end) has 2019 taxable income of $650,000 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 | $ | 2,270,000 |
| Computer equipment | February 10 | 263,000 | |
| Furniture | April 2 | 880,000 | |
| Total | $ | 3,413,000 | |
a. What is the maximum amount of §179 expense TDW may deduct for 2019?
b. TDW may deduct in 2019 on the assets it placed in service in 2019, assuming no bonus depreciation.
What is the maximum total depreciation, including §179 expense?
Section 179 of the IRS Code was enacted to help small businesses by allowing them to take a depreciation deduction for certain assets (capital expenditures) in one year, rather than depreciating them over a longer period of time. Taking a deduction on an asset in its first year is called a "Section 179 deduction." You can see that there is a benefit to taking the full deduction for the cost of the item immediately, rather than being required to spread out the deduction over the item's useful life.
There are annual limits on the amount of Section 179 Deductions. The limits are:
If you deduct only part of the cost of qualifying property as a section 179 deduction, you can generally depreciate the cost you do not deduct. This means that you can spread out the remaining amount over the life of the property.
| Maximum amount of 179 expense TDW may deduct for- | ||||||
| Basis | Max amount allowed | |||||
| Machinery | 2,270,000.00 | 1,000,000.00 | ||||
| Computer Equipment | 263,000.00 | 263,000.00 | ||||
| Furniture | 880,000.00 | 880,000.00 | ||||
| Total | 3,413,000.00 | 2,143,000.00 | ||||
| Maximum total depreciation, including §179 expense- | ||||||
| Depreciation on remaining amount of machinery (taking recovery period 10 years) that is not allowed as Section 179 expense deduction | Amount | |||||
| =1270000*0.1*110/365 | 38,273.97 | |||||
| Sec 179 expense deduction as per calculation above | 2,143,000.00 | |||||
| 2,181,273.97 | ||||||
Assume that TDW Corporation (calendar-year-end) has 2019 taxable income of $650,000 for purposes of computing the...
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