Compute maximum depreciation deductions including expense

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Reference no: EM13906441

Back in Boston, Steve has been busy creating and managing his new company, Teton Mountaineering (TM), which is based out of a small town in Wyoming. In the process of doing so, TM has acquired various types of assets. Below is a list of assets acquired during 2014:

Asset Cost Date Placed in Service

Office furniture

$  10,000

02/03/2014

Machinery

560,000

07/22/2014

Used delivery truck*

15,000

08/17/2014

*Not considered a luxury automobile, thus not subject to the luxury automobile limitations.

During 2014, TM had huge success (and had no §179 limitations) and Steve acquired more assets the next year to increase its production capacity. These are the assets acquired during 2015:

Asset

Cost

Date Placed in Service

Computers & Info. System

$  40,000

03/31/2015

Luxury Auto†

80,000

05/26/2015

Assembly Equipment

475,000

08/15/2015

Storage Building

400,000

11/13/2015

†Used 100%  for business purposes.

 

 

TM generated a taxable income in 2015 before any §179 expense of $732,500 (assume bonus depreciation and the 2014 §179 limitations are extended to 2015).

Required

a) Compute maximum 2014 depreciation deductions including §179 expense (ignoring bonus depreciation).

b) Compute maximum 2015 depreciation deductions including §179 expense (ignoring bonus depreciation).

c) Compute maximum 2015 depreciation deductions including §179 expense, but now assume that Steve would like to take bonus depreciation.

d) Ignoring part (c), now assume that during 2015, Steve decides to buy a competitor's assets for a purchase price of $350,000. Compute maximum 2015 cost recovery including §179 expense (ignoring bonus depreciation). Steve purchased the following assets for the lump-sum purchase price.

Asset Cost

Date Placed in Service

Inventory

$  20,000

09/15/2015

Office furniture

30,000

09/15/2015

Machinery

50,000

09/15/2015

Patent

98,000

09/15/2015

Goodwill

2,000

09/15/2015

Building

130,000

09/15/2015

Land

20,000

09/15/2015

e) Complete Part I of  Form 4562 for part (b).

Reference no: EM13906441

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