Question

6.AMP Corporation (calendar year end) has 2019 taxable income of $1,825,000 before the §179 expense. During 2019, AMP acquired the following assets:

Asset		Placed in Service	Basis
Machinery		September 12	$1,540,000
Computer Equipment		February 10	365,000
Office Building		April 2	480,000
Total			$2,385,000

What is the maximum amount of §179 expense AMP may deduct for 2019?

Answer 1

Under §179 cost of certain assets which are placed in service during the period can be expensed off, instead of capitalizing the same. So, the tax liability for current year will reduce. But this deduction is limited to $1,020,000 per tax year for 2019. (PS: The amount has been increased to $1,040,000 for 2020 tax year, not relevant for this question). Since the company has total cost more than the limit, the amount will be limited to $1,020,000. Further there is phase out criteria on the purchase price, which is $2,550,000 and is not applicable to the question as, Total purchase is $2,385,000 only,

So, AMP Corporation ca claim a deduction of only $1,020,000 this tax year under Section 179.