PLEASE HELP Loni Company paid $527,000 for tangible personalty in 2017 and elect

Question

PLEASE HELP

Loni Company paid $527,000 for tangible personalty in 2017 and elected to expense $510,000 of the cost (the limited dollar amount for 2017). Loni's taxable income before a Section 179 deduction was $394,100. Loni paid $23,700 for tangible personalty in 2018 and elected to expense the entire cost. Loni's taxable income before a Section 179 deduction was $228,000. Use Table 7-2 a. Compute Loni's Section 179 deduction and taxable income for 2017. b. Compute Loni's Section 179 deduction and taxable income for 2018.

Explanation / Answer

Section 179 deduction is limited to taxable income of the taxpayer.

2017:

In 2017 taxable income before section 179 deduction is $394,100. Thus, section 179 deduction is limited to $394,100 and the balance section 179 expense election amount of $115,900 is carried over to 2018. Then 2017 taxable income reduces to $0.

2018

2018 section 179 election amount is $23,700 plus carried over from 2017 of $115,900 creates total section 179 expense of $139,600. As taxable income before section 179 expense is more than deductible 179 expense total amount of 179 expense is deductible. Thus, 179 expense for 2018 is $139,600.

Taxable income after section 179 expesne = $228,000 - $139,600= $88,400

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