Question

Dain’s Diamond Bit Drilling purchased the following assets this year. Purchase Original Asset Date Basis Drill bits (5-year) Feb-20 $ 115,000 Drill bits (5-year) Aug-20 118,500 Commercial building May-15 299,000 Assume its taxable income for the year was $76,500 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 February drill bits’ original basis was $2,502,000, what is the maximum amount of §179 expense Dain's may deduct for the year?

d. If the February drill bits’ original basis was $28,742,000, what is the maximum amount of §179 expense Dain's may deduct for the year?

Answer 1

c

Maximum amount of section 179 election available is:

Particulars		Amount	Amount
Limit available			1,020,000
Phase out:
Assets placed in service		2,620,500
Less threshold		2,550,000
Phase out			70,500
179 election available			949,500

But deduction is limited to $76,500 taxable income.

Answer is $76,500.

d

No section 179 expense deduction available as cost of assets placed in service is over maximum threshold.

Answer is $0.

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