A textile company purchased the following assets throughout 2015: Asset Placed i
ID: 1193796 • Letter: A
Question
A textile company purchased the following assets throughout 2015:
Asset
Placed in service
Initial Basis
Land for mill
January 1
$1,000,000
Mill building
January 1
$300,000
Equipment (new)
March 4
$1,800,000
Small used truck for deliveries
June 8
$25,000
Total
$3,125,000
What is the maximum total depreciation expense possible that the corporation may deduct in 2015? Assume that the land and mill building do not qualify as qualified real property for Sec. 179 and that the company has sufficient taxable income that it creates no binding limitation on any potential Sec. 179 expense (if applicable). To allow better potential for partial credit, make sure to clearly mark your total amount for Sec. 179 expense, bonus, and regular depreciation clearly.
Asset
Placed in service
Initial Basis
Land for mill
January 1
$1,000,000
Mill building
January 1
$300,000
Equipment (new)
March 4
$1,800,000
Small used truck for deliveries
June 8
$25,000
Total
$3,125,000
Explanation / Answer
To begn with let us first look at the Section 179 briefly :
2015 Deduction Limit = $25,000
This deduction is good on new and used equipment, as well as off-the-shelf software. This limit is only good for 2015, and the equipment must be financed/purchased and put into service by the end of the day, 12/31/2015.
2015 Spending Cap on equipment purchases = $200,000
This is the maximum amount that can be spent on equipment before the Section 179 Deduction available to your company begins to be reduced on a dollar for dollar basis. This spending cap makes Section 179 a true "small business tax incentive".
Bonus Depreciation: not available in 2015
In prior years, Bonus Depreciation would be taken after the Section 179 Spending Cap is reached. Note: Bonus Depreciation was available for new equipment only; in 2015, Bonus Depreciation is not available at all.
Hence according to this, depriciation can be deducted only on small used truck as follows :
Equipment Purchases 25000 First Year Write Off ( $ 25,000 maximum in 2015) 25000 50% bonus First Year Depreciation ( Currently not avaliable for thsi tax year) 0 Normal first year depreciation(20% in each of 5 years in remaining amount) 0 Total Year Deduction 25000Related Questions
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