Question

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Back in Boston, Steve has been busy creating and managing his new company, Teton Mountaineering (TM), which is based out of a small town in Wyoming. In the process of doing so, TM has acquired various types of assets. Below is a list of assets acquired during 2016: Exhibit 10-8 (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Round intermediate calculations and final answer to the nearest whole dollar amount.)

Asset	Cost		Date Placed in Service
Office furniture	$	10,000	02/03/2016
Machinery		560,000	07/22/2016
Used delivery truck*		15,000	08/17/2016

* Not considered a luxury automobile, thus not subject to the luxury automobile limitations.

During 2016, TM had huge success (and had no §179 limitations) and Steve acquired more assets the next year to increase its production capacity. These are the assets acquired during 2017:

			Date Placed
Asset	Cost		in Service
Computers & info. system	$	40,000	03/31/2017
Luxury auto†		80,000	05/26/2017
Assembly equipment		475,000	08/15/2017
Storage building		400,000	11/13/2017

^†Used 100% for business purposes.

TM generated taxable income in 2017 of $732,500 for purposes of computing the §179 expense.

a. Compute the maximum 2016 depreciation deductions including §179 expense (ignoring bonus depreciation).

2016 depreciation deduction (including 179) _______

b. Compute the maximum 2017 depreciation deductions including §179 expense (ignoring bonus depreciation).

2017 depreciation deduction (including 179)________

c. Compute the maximum 2017 depreciation deductions including §179 expense, but now assume that Steve would like to take bonus depreciation on the 2017 assets.

2017 decprection deduction (including 179) _________

d. Ignoring part c, now assume that during 2017, Steve decides to buy a competitor’s assets for a purchase price of $350,000. Compute the maximum 2017 cost recovery including §179 expense (ignoring bonus depreciation). Steve purchased the following assets for the lump-sum purchase price.

			Date Placed
Asset	Cost		in Service
Inventory	$	20,000	09/15/2017
Office furniture		30,000	09/15/2017
Machinery		50,000	09/15/2017
Patent		98,000	09/15/2017
Goodwill		2,000	09/15/2017
Building		130,000	09/15/2017
Land		20,000	09/15/2017
2017 cost of recovery ______ e. Complete Part I of Form 4562 for part (b). Steve Dallimore's identifying number: 361-23-8975 (Input all values as positive numbers. Use 2017 tax rules regardless of year on tax form.)

Answer 1

Assuming the financial year from Jan-Dec depreciation for the year 2016

a)Office Furniture- 02/03/2016-10,000 = 10,000*10/100*305/365=836

Machinery--07/22/2016-5,60,000=5,60,000*15/100*163/365=37,512

Used delivery truck-08/17/2016-15,000=15,000*15/100*146/365=900

Total depreciation =39,248 plus 179 hence total depreciation =39,427

b)Depreciation on assets acquired during 2017

Computers and info system-03/31/2017-40,000=40,000*60/100*276/365=18,148

Luxury auto-05/26/2017-80,000=80,000*15/100*220/365=7,233

Assembly equipment-08/15/2017-4,75,000=475000*15/100*139/365=27,134

Storage building-11/13/2017-4,00,000=400000*10/100*49/365=5,370

Total Depreciation=57,885 plus 179 =58,064