Question

Assume that Timberline Corporation has 2019 taxable income of $244,000 for purposes of computing the §179 expense. It acquired the following assets in 2019: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

	Purchase
Asset	Date		Basis
Furniture (7-year)	December 1	$	454,000
Computer equipment (5-year)	February 28		94,000
Copier (5-year)	July 15		34,000
Machinery (7-year)	May 22		484,000
Total		$	1,066,000

b. What would Timberline’s maximum depreciation deduction be for 2019 assuming no bonus depreciation?

c. What would Timberline’s maximum depreciation deduction be for 2019 if the machinery cost $3,040,000 instead of $484,000 and assuming no bonus depreciation?

Answer 1

B.

Quarter	Assets	Amount($)	Sec 179 Exp.($)	Balance($)	Bonus Dep.($)	Life	Rate	Depreciation($)
4	Furniture	454,000	0	454,000	0	7	14.29%	64,857
1	Computer Equipment	94,000	0	94,000	0	5	20%	18,800
3	Copier	34,000	0	34,000	0	5	20%	6,800
2	Machinery	484,000	0	484,000	0	7	14.29%	69,143
Section 179 Expense	$0
Bonus Depreciation	$0
Maximum total depreciation expense	$159,600

maximum depreciation deduction
Particulars	Amount
Property Placed in service in 2019 ( 454,000+94,000+34.000+484,000)	$1,066,000
Less: threshold for sec 179 (2019 limit)	$2,500,000
Phase out of maximum Sec 179 expense	$0
Maximum Sec 179 expense before phase out(sec 179 limit (2019) )	$1,000,000
Less : phase out & maximum sec 179 expense	$0
Maximum sec 179 expense after phase out	$0

C.

Quarter	Assets	Amount($)	Sec 179 Exp.($)	Balance($)	Bonus Dep.($)	Life	Rate	Depreciation($)
4	Furniture	454,000	0	454,000	0	7	14.29%	64,857
1	Computer Equipment	94,000	0	94,000	0	5	20%	18,800
3	Copier	34,000	0	34,000	0	5	20%	6,800
2	Machinery	3,040,000	0	3,040,000	0	7	14.29%	4,34,286
Section 179 Expense	$0
Bonus Depreciation	$0
Maximum total depreciation expense	$524,743

maximum depreciation deduction
Particulars	Amount
Property Placed in service in 2019 ( 454,000+94,000+34.000+3,040,000)	$3,622,000
Less: threshold for sec 179 (2019 limit)	$2,500,000
Phase out of maximum Sec 179 expense	$1,122,000
Maximum Sec 179 expense before phase out(sec 179 limit (2019) )	$1,000,000
Less : phase out & maximum sec 179 expense	$1,122,000
Maximum sec 179 expense after phase out	$0