Question

On July 1 of the current year, Jeremiah Company purchased and placed into service factory machinery to be used in its operations.  The machinery cost $150,000 and qualifies as 7-year MACRS property.  The machines were the only assets placed into service during the year.  Jeremiah elects to expense the maximum under bonus depreciation and nothing under Section 179.  The company’s taxable income before any deduction related to the machines is $80,000.  Assume the depreciation table percentages are 14.29% for Year 1 and 24.49% for Year 2.  What is the total maximum expense deduction for these machines in the current year? SHOW WORK FOR PARTIAL CREDIT.

Answer 1

• Explanation :

• Bonus depreciation is a tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible assets, such as machinery, rather than write them off over the "useful life" of that asset.
• Bonus depreciation is also known as the additional first year depreciation deduction.

• Calculation :

	Amount $
Section 179	50,000
Add : Normal Depreciation ( w.n )	14,290
Total maximum expense deduction incurrent year	64,290

working note :

Normal Depreciation = $150,000 - $50,000

= $100,000 14.29 %

= $14,290