Acorn Construction (calendar year-end C-corporation) has had rapid expansion dur

Question

Acorn Construction (calendar year-end C-corporation) has had rapid expansion during the last half of the current year due to the housing market's recovery. The company has record income and would like to maximize its cost recovery deduction for the current year.

What is Acorn’s maximum cost recovery deduction in the current year assuming that bonus depreciation and 2014 §179 limits are extended to 2015?

Acorn Construction (calendar year-end C-corporation) has had rapid expansion during the last half of the current year due to the housing market's recovery. The company has record income and would like to maximize its cost recovery deduction for the current year.

Asset Placed in Service Basis New equipment and tools August 20 $800,000 Used light duty trucks October 17 $1,200,000 Used machinery November 6 $525,000 Total $2,525,000

What is Acorn’s maximum cost recovery deduction in the current year assuming that bonus depreciation and 2014 §179 limits are extended to 2015?

Explanation / Answer

Solution.

Section 179 deduction   = $0

Bouns depreciaetion deduction = $1,262,500

Normall first year deduction       = $252,500

Total first year Deduction           = $1,515,000

Cash saving on purchase          = $530,250

Assume tax rate @35%.

Section 179 Deduction Limits for 2016 Deduction Limit $500,000 Limit on Capital Purchases $2,000,000 Bonus Depreciation 50%

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