Question

Kondar Corporation (a calendar-year taxpayer) spent $2,090,000 to purchase used machinery in February 2017. a. What...

Kondar Corporation (a calendar-year taxpayer) spent $2,090,000 to purchase used machinery in February 2017.

a. What is the maximum that Kondar can elect to expense under Section 179?

b. What is the basis for calculating regular MACRS depreciation on this machinery if the maximum Section 179 deduction is elected?

c. What us Kondar's total depreciation deduction for 2017?

d. What is Kondar's depreciation deduction of this machinery for 2018?

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Answer #1
a)
$500,000 less the excess of $2,080,000 over $2,000,000).($500,000 - $80,000) $420,000.00
The amount of the deduction is the total cost of all of the property, up to $500,000 for each individual item of property. The total Section 179 deductions for all property can't exceed the $2 million maximum
b)
Basis = $2,080,000 - $420,000 $1,660,000.00
c) The machinery is 7-year property and used property is not eligible for bonus depreciation
Depreciation Deduction 2017 =( $1,660,000 x 14.29% )+ $420,000 $657,214.00
d)
Depreciation Deduction 2018 = $1,660,000 x 24.49% $406,534.00
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