Question

AMP Corporation (calendar-year-end) has 2018 taxable income of $1,000,000 for purposes of computing the §179 expense. During 2018, AMP acquired the following assets: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

	Placed in
Asset	Service		Basis
Machinery	September 12	$	1,550,000
Computer equipment	February 10	$	365,000
Office building	April 2	$	480,000
Total		$	2,395,000

b. What is the maximum total depreciation, including §179 expense, that AMP may deduct in 2018 on the assets it placed in service in 2018 assuming no bonus depreciation?

Answer 1

Section 179 deductions are available on qualified property, where buildings are also included in such property from the year 2018. Therefore, for the question given, all the properties are qualified for section 179 deduction. Under this section, for the year 2018, businesses can take benefit of deducting $1 million directly for the purchase of qualifying property in the first year itself. However this limit is subject to the limit of $2.5 million.

Maximum total depreciation can hence be calculated as follows(Using Table 1, Table 2, Table 3, Table 4 and Table 5):

Machinery (7 years property) = [($1550000-$1000000)*14.29%] + $1000000 =$1078595

Computer equipment (5 years property) = $365000*20% = $73000

Office Building (39 years property) = $480000*1.819% = $8731

Maximum total depreciation = $1078595 + $73000 + $8731 = $1160326