In: Finance
Acorn Construction (calendar-year end C-corporation) has had rapid expansion during the last half of the current year due to the housing market’s recovery. The company has $5,000,000 of taxable income before the cost recovery deduction and would like to maximize its cost recovery deduction for the current year. Acorn provided the following information: Assets Placed in Service Basis New Equipment and Tools August 20 $1,750,000 Used Light Duty Trucks January 17 1,500,000 Used Machinery February 6 525,000 Total $3,775,000 The used assets had been contributed to the business by its owner in a nontaxable transaction. What is Acorn’s maximum cost recovery expense in the current year?
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Acorn is not eligible for §179 expensing Therefore its maximum §179 amount is reduced to zero. In addition, Acorn must use the mid-quarter convention because it places more than 40 percent of its assets into service in the last quarter ((1,500,000+525,000)/3,775,000 = 54%). Acorn is eligible to take bonus depreciation on its new (not used) assets. |