Question

On November 16, 2018, Ace Company purchased manufacturing equipment (7-year property) for 2,400,000 and computers and duplication machines (5-year property) for 250,000. Ace elects not tot take bonus depreciation on these assets but wants to take Section 179 expensing and MACRS depreciation instead. These assets are the only asset purchases that Ace makes during all of 2018. Compute Ace’s Section 179 expense deduction and its MACRS depreciation deduction for these assets in 2018 assuming that any expensing is used first for the 7-year assets and that Ace’s taxable income for the year is 8,500,000.

Answer 1

Calculation of Depreciation Under MACRS

as the asset is placed in the MACRS ,then depreciation schedule will be as per the Rules.

In the given question for 7 years Equipment it will be @14.29% in First Year

For 5 years porperty it was @20% in Year1 .

Therefore than depreciation will be

$2,400,000 * 14.29%= $342,960

$250,000*20%=$50,000

So Total Depreciation will be $392,960

Under 179,

the Decution Limit = $1,000,000

the Phaseout Limit =$2,500,000

Assuming that the assets where put to use in the year 2018.

Total purchase = $2,650,000.

then

the Depreciation= $1,000,000-($2,650,000-$2,500,000)

=$1,000,000-$150,000

=$850,000.

how ever we can claim $1,000,000 in entire if we take only Manufacturing equipment as it is under the limit of $2.5 Mn.