Question

AMP Corporation (calendar-year-end) has 2018 taxable income of $1,000,000 for purposes of computing the §179 expense. During 2018, AMP acquired the following assets:

	Placed in
Asset	Service		Basis
Machinery	September 12	$	1,550,000
Computer equipment	February 10		365,000
Office building	April 2		480,000
Total		$	2,395,000

a. What is the maximum amount of §179 expense AMP may deduct for 2018?

b. What is the maximum total depreciation, including §179 expense, that AMP may deduct in 2018 on the assets it placed in service in 2018 assuming no bonus depreciation? (Round your intermediate calculations to the nearest whole dollar amount.)

Answer 1

Answer a:

Maximum amount of §179 expense AMP may deduct for 2018 = $ 1,000,000.

Explanation:

Machinery ($ 1,550,000) and computer equipment ($ 365,000) will the the qualified property totalling $ 1,915,000 under 179 deduction and these are lower than the limit of $ 2,500,000.

Answer b:

Maximum total depreciation = $ 1,160,326 (rounded off)

Calculation:

Particulars	Initial value	179 expense	Balance	Rate	Depreciation
Machinery (7 years)	$1,550,000	$1,000,000	$550,000	14.29%	$78,595.00
Computer equipment (5 years)	$365,000		$365,000	20.00%	$73,000.00
Office building (39 years)	$480,000		$480,000	1.82%	$8,731.20
Total	$2,395,000	$1,000,000	$1,395,000		$160,326.20
Add: Taxable value					$1,000,000.00
Total Depreciation (rounded off)					$1,160,326

In case of any doubt, please comment.