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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