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Jim, a single taxpayer and sole owner of an S Corporation, has a very profitable manufacturing...

Jim, a single taxpayer and sole owner of an S Corporation, has a very profitable manufacturing business that generates $500,000 in taxable income in 2018. His overall taxable income is more than $500,000. He pays $100,000 in wages and has equipment that originally cost $600,000.

a) What is his allowable deduction?

b) Assume the same facts as (a) except that Jim’s business has original equipment that cost $1,500,000. What is his allowable deduction?

c) Assume the same facts as in (a) except that $300,000 in wages are paid. What is the allowable deduction?

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