Dain’s Diamond Bit Drilling purchased the following assets this year. Asset Purc

Question

Dain’s Diamond Bit Drilling purchased the following assets this year. Asset Purchase Date Original Basis Drill bits (5-year) February 13 $ 89,500 Drill bits (5-year) August 25 91,250 Commercial building May 22 230,000 Assume its taxable income for the year was $41,250 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? b. What is Dain’s maximum depreciation expense for the year (including §179 expense)?

Explanation / Answer

Asset Original Basis §179 expense Remaining Basis Rate Depreciation Expense Drill Bits (5 years) $89,500 $41,250 $48,250 20% $9,650 Drill Bits (5 years) $91,250 0 $91,250 20% $18,250 Commercial Building (39.5 years) $230,000 0 $230,000 1.82% $4,183.70 §179 expense $41,250 Total Depreciation Expense $73,334

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