Question

Yeti, Inc. purchased the following property in 2017:

Computer $375,000 Purchased on 10/28/2017
Furniture              $295,000 Purchased on 6/9/2017

Yeti has taxable income (before taking into account any 179 expense) of $875,000.

a. Calculate Yeti’s total depreciation deduction on both assets if the 179 expense is first taken on the computer.
b. Calculate Yeti’s total depreciation deduction on both assets if the 179 expense is first taken on the furniture.
c. What is your advice to Yeti regarding the 179 deductions based on your results from a. and b.?

d. What is the depreciation allowed under H.R. 1 if the assets were placed in service in 2018?

Answer 1

Maximum allowed Sec 179 expensing /deduction for 2017 is 510000

As the tax income 875000 > 510000, full 510000 is allowed as deduction

Accordingly,

a. Yeti’s total depreciation deduction on both assets if the 179 expense is first taken on the computer.

Computer	375000
Furniture	135000
Total deduction allowed	510000

b. Yeti’s total depreciation deduction on both assets if the 179 expense is first taken on the furniture.

Furniture	295000
Computer	215000
Total deduction allowed	510000

c.

As computers have short life when compared to furniture ,it is advisable to avail 179 expense first on computers.

ie.,   a. is recommended.

d. The maximum amount a taxpayer can expense under Section 179 has increased to $1 million,from 2018

So,

Computer	375000
Furniture	295000
Total deduction allowed	670000