Question

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

	Purchase	Original
Asset	Date	Basis
Drill bits (5-year)	Jan-08	$	90,500
Drill bits (5-year)	Jul-15		98,500
Commercial building	Apr-13		286,000

Assume its taxable income for the year was $64,250 for purposes of computing the §179 expense (assume no bonus depreciation). (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Leave no answer blank. Enter zero if applicable.)

c. If the January drill bits’ original basis was $2,596,000, what is the maximum amount of §179 expense Dain's may deduct for the year?

Answer 1

AS PER YEAR 2020

	Particulars	Amount
1	Total cost of the property (2,596,000 + 98,500)	$	2,694,500
2	Threshold for § 179 phase out 2020		2,590,000
3	Phase Out of maximum §179 expenses (1-2)		104,500
4	Maximum 179 expenses before phase-out		1,040,000
5	Phase-out maximum §179 expenses, maximum of		104,500
6	Maximum §179 expense after phase-out (4-5)		935,500
7	Taxable income before Section 179 deduction		64,250
8	§179 expenses after taxable Income limitation, smaller of 6 and 7		64,250

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