Question

Alabama Crane acquires and places in service a new crane (assume it is ten year property) on November 10, 2017, at a cost of $610,000. Alabama Crane wants to claim the maximum possible depreciation deduction in 2017. Determine the maximum total deductions available from the depreciaition of the machine for 2017 assuming Alabama Crane has taxable income of $800,000.

Answer 1

According to section 179 the maximum permissible amount for deduction in the year 2017 is $500,000. To avail the benefits of 179 the machinery must be purchased and put to service by 31/12/2017.

However the cost of deduction is limited to the Income of the tax payer.

Hence the cost of deduction that can be availed

Particulars	Amount (in$)
Cost of Machinery	610,000
Sec 179 deduction	500,000
Bonus depreciation @50%	55,000
Normal depreciation	11,000
Total first year deduction	566,000
Cash savings (assuming 35%tax bracket)	198,100
Cost of machine after Tax savings	411,900