Question

During 2018, Axel Corporation purchases machinery (5-year property) for $200,000 and decides not to take a...

  1. During 2018, Axel Corporation purchases machinery (5-year property) for $200,000 and decides not to take a Sec. 179 deduction.

    a. Compute maximum tax depreciation for the machinery for 2018−2023.

b. Compute maximum tax depreciation for 2018−2023 if Axel does not take a Sec. 179 deduction and elects out of 100% bonus.

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Answer #1

a. If the corporation decides not to take Sec 179 deduction, but opts in for Bonus depreciation,

Year Depreciation
2018 $200,000
2019 $0
2020 $0
2021 $0
2022 $0

b. If the corporation decides not to take Sec 179 deduction also opts out for Bonus depreciation, depreciation would be charged using MACRS

Year Rate Depreciation
2018 20% $40,000
2019 32% $64,000
2020 19.2% $38,400
2021 11.52% $23,040
2022 11.52% $23,040
2023 5.76% $11,520

Feel free to ask for any clarification, if required. Kindly provide feedback by thumbs up. It would be highly appreciated. Thank You.

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