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a. Colonel Trautman runs a small demolition business with taxable income before any 179 expense of...

a. Colonel Trautman runs a small demolition business with taxable income before any 179 expense of $450,000. He acquired a machine for the business on Feb 2, 2019 for $85,000, and an office building on April 1, 2019 for 22,000. Both of the assets are new and were put in service immediately.

Calculation the maximum deductions he is allowed take related to cost recovery for these assets for the year.

b. On Nov 12, 2020, Colonel Trautman sells the office building, How much depreciation expense can be deduct for the building in 2020.

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Answer #1

Solution:

a. Machine acquired for business purpose is only eligible for deduction under section 179. Hence full amount of deduction can be claimed for machine(i.e. $85000). As per applicable tax rules, 2% of depreciation can be claimed on office building i.e. ($22000 x 2% x 9/12) = $330.

Therefore, maximum allowed deduction = $85000 + $330 = $85330

b. If Trautman sells the office building on Nov 12, 2020 tax dedfuction that he acn be claimed as per tax laws will be Nil.

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