Dain’s Diamond Bit Drilling purchased the following assets this year Assume its
ID: 2481181 • Letter: D
Question
Dain’s Diamond Bit Drilling purchased the following assets this year
Assume its taxable income for the year was $70,000 before deducting any §179 expense (assume no bonus depreciation but assume that the 2014 §179 limits are extended to 2015). (Use MACRS Table 1,Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)
A. What is the maximum amount of §179 expense Dain may deduct for the year?
What is Dain’s maximum depreciation expense for the year (including §179 expense)?
If the February drill bits’ original basis was $2,376,500, what is the maximum amount of §179 expense for the year? Dain may deduct for the year?(Leave no answer blank. Enter zero if applicable.)
If the February drill bits’ basis was $2,496,500, what is Dain’s maximum §179 expense for the year?
Asset Purchase Date Original Basis Drill bits (5-year) February 8 $ 110,000 Drill bits (5-year) July 2 111,250 Commercial building April 27 363,000Assume its taxable income for the year was $70,000 before deducting any §179 expense (assume no bonus depreciation but assume that the 2014 §179 limits are extended to 2015). (Use MACRS Table 1,Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)
Explanation / Answer
1) a
Particulars::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::Amount
Property placed in services in year:::::::::::::::::::::::::::::$221,250
Less:
sec 179 phase ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::$2,000,000
_______________________________________________________
Phase out Maximum 2015 ::::::::::::::::::::::::::::::::$0(because sec 179 amount is bigger value that service value)
Phase out begin Maximum::::::::::::::::::::::::::::::::::::::$500,000
Less:
Phase out of maximum::::::::::::::::::::::::::::::::::::::::::::::$0
__________________________________________________
Phase out of maximum Sec 179 expenses::::::::::::::$500,000
Less:
Taxable Income:::::::::::::::::::::::::::::::::::::::::::::::::::::::$70,000
______________________________________________________
Sec 179 deductible after taxable :::::::::::::::::::::$70,000 or
Phase out of maximum Sec 179 expenses::::::::::::::$500,000 or which ever is low should be taken
$70,000 is low as considered as Phase out of maximum Sec 179 expenses.
_________________________________________________________________________________
b)Particulars::::::::::::::::::::::::::: Amount
Drill bits (5-year)::::::::::::::::::::::::::::110,000
Less:
Sec 179 Expense::::::::::::::::::::::::::$70,000
________________________________________
Remaining Basis:::::::::::::::::::::::::::$40,000
Depreciation Expense
Rate 20% *$40,000::::::::::::::::::::::$8,000
________________________________
Drill bits (5-year):::::::::::::::::::::::::::111,250
Less:
Sec 179 Expense:::::::::::::::::::::::::::::::0
________________________________________
Remaining Basis::::::::::::::::::::::::::$111,250
Depreciation Expense
Rate 20% *$111,250 ::::::::::::::::::$22,250
__________________________________
Commercial building::::::::::::::$363,000
Less:
Sec 179 Expense:::::::::::::::::::::::::0
________________________________________
Remaining Basis::::::::::::::::::::::::::$363,000
Depreciation Expense
Rate $1.89 *$363,000 ::::::::::::::::::$6860.
________________________________________
All depreciation Expense=$8,000 + $22,250 +$6860=$37,110
______________________________________________________________________________
c)
Particulars::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::Amount
Property placed in services in year::::::::::::::::::::::::::::: =$2487750($2,376,500+111,250)
Less:
sec 179 phase ::::::::::::::::::::::::::::::::::::::::::::::::::::::::::$2,000,000
_______________________________________________________
Phase out Maximum 2015 ::::::::::::::::::::::::::::::::$487750
Phase out begin Maximum::::::::::::::::::::::::::::::::::::::$500,000
Less:
Phase out of maximum::::::::::::::::::::::::::::::::::::::::::::::$487750
_____________________________________________________
Phase out of maximum Sec 179 expenses::::::::::::::$12,250
or taxable income for the year was $70,000 whichever is low $12,250 is low
maximum Sec 179 expenses: is $12,250
_________________________________________________________________________
d)
Particulars::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::Amount
Property placed in services in year:::::::::::::::::::::::::::::$2607750($2,496,500+111,250)
Less:
sec 179 phase ::::::::::::::::::::::::::::::::::::::::::::::::::::::::$2,000,000
_______________________________________________________
Phase out Maximum 2015 ::::::::::::::::::::::::::::::::$607,750
Phase out begin Maximum::::::::::::::::::::::::::::::::::::::$500,000
Less:
Phase out of maximum::::::::::::::::::::::::::::::::::::::::::::::$607,750
____________________________________________________
Phase out of maximum Sec 179 expenses::::::::::::::$0
_______________________________________________________
Phase out of maximum Sec 179 expenses::::::::::::::$0 and taxable income is $70,000 whichever is low, 0 is low
So $0 is Phase out of maximum Sec 179 expenses because Phase out of maximum $500,000 was exceed by $607,750
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.