Question

1-Maple Company purchases new equipment (7-year MACRS property) on January 10, 2018, at a cost of $430,000. Maple also purchases new machines (5-year MACRS property) on July 19, 2018 at a cost of $290,000. Maple wants to maximize its MACRS deductions; assume no taxable income limitations apply. What is Maple's total MACRS deduction for 2018?

a. $119,447.

b. $560,000.

c. $617,148.

d. $720,000.

2-Ellie (a single taxpayer) is the owner of ABC, LLC. The LLC (a sole proprietorship) reports QBI of $900,000 and is not a "specified services" business. ABC paid total W-2 wages of $300,000, and the total unadjusted basis of property held by ABC is $30,000. Ellie's taxable income before the QBI deduction is $740,000 (this is also her modified taxable income). What is Ellie's QBI deduction for 2018?

a. $75,750.

b. $148,000.

c. $150,000.

d. $180,000.

3-The § 179 deduction can exceed $1,000,000 in 2018 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

True or false

Answer 1

(1)

Ans - $720000 (Option d)
Maple's maximum MACRS deductions = (Cost of 7 years MACRS property + Cost of 5 years MACRS property)
=> ($430000 + $290000) = $720000
This is because in 2018, 179 deduction maximum is $1000000 and additional first year depreciation can also be claimed as well.

(2)

Ans - $148000 (Option b)
The threshold limit is $207500 for that year and Ellie's taxable income before QBI deductions exceeds the threshold limit.
Ellie's QBI deduction will be lesser of the following:
-20% of Taxable income before QBI deduction = (20% of $740000) = $148000
-50% of W-2 wages = (50% of $300000) = $150000
Thus Ellie's QBI deduction = $148000

(3)

Ans - False
The 179 amount eligible for expensing in a carryforward year will be limited to least of the following:
- The business income limitation in the Next year
- The statutory dollar amount reduced by the cost of 179 property placed in service which exceeds the appropriate acquisition year in the next year