Question

Brett started a new construction business in April 2017. In connection with the new business, he purchased a new backhoe for $60,000 in June 2017 and immediately placed it in service. The new business is struggling and expecting to show a loss for 2017. Brett is considering expensing the $60,000 cost of the backhoe under §179 on the 2017 tax return. Brett has been awarded a large project for 2018, and will show a substantial profit (over $100,000) for the year ending 12/31/2018. Your response must fully address the following: Evaluate the appropriateness of Brett’s plan. Explain your position. How could changes in tax law affect the appropriateness of Brett's plan?

Answer 1

1. Brett purchase a new backhoe of $60,000 it is cover as long term assets under section 179 as per IRS allows to dedcut The full purchase price as qualifying equipment. Brett Can depreciate backhoe $60,000 for year 2017 .
2. Brett can take deductions for year 2017 tax return as said equipment placed in services On june or to end of year 12/31/2017 to the business is must .
3. Since section 179 have some limits , only equipment eligible property palced into Service in that tax year in 2017 maximum expensing amount written off ($510,000) and Limits to the total amounts of the equipment purchase ($2,030,000) . The deductions Begins to phase out after $2,030,000 is spent by an given business .
4. Changes in tax law affect appropriateness of brett's plan as this expenses of $60,000 Towards will not written off.
5. This section 179 writtes off expenses upto $5,10,000 in frist year it self leaving the rest Of cost to be depreciated for remaining years .
6. If the brett expects business substainally losses that the project will show lossed he can File enter with lossed which can carryforward to later years . then in later years if income Arise he can set off the brought forward losses with current year income .
7. If brett construction business can profit in 2018 than losses of year 2017 can write-off in Year2018 .