Question

Assume that TDW Corporation (calendar year end) has 2019 taxable income of $650,000 before the §179 expense, acquired the following assets during 2019:

Asset		Placed in Service	Basis
Machinery		October 12	$2,260,000
Computer Equipment		February 10	263,000
Furniture		April 2	880,000
Total			$3,403,000

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

Answer 1

SECTION 179 EXPENSES : -

Provison: - According to section 179 of US FEDERATION ACT, certain expenses which are capital in nature are allowed to be expensed in the year of acquisition itself, instead of capitalizing thema dn depreciating year by year. Main objective of this section is to provide tax releif and reduction in tax liability of tax payers making investments in such assets.

Conditions of Provision 179: -

1. Asset purchased must be assets like equipments, vehicles or softwares etc.

2. Asset purchased must be used for business purpose only for atleast 50% of their utelized time.

3. Maximum deduction allowed under this section should not exceed $10,40,000 and value of property purchased to $25,90,000 for the financial year 2020.

4. In any case value of exemption allowed under this section cannot exceed net earnings from business without considering section 179 expense.

FACTS OF THE CASE: -

TDW Corporation has purcased Machinary, computer equipment and furniture for placing them in service basis. i.e. for business purpose and hence it qualifies for availing section 179 exemption.

Value of property here is much higher than its total income.

CONCLUSION : -

TDW is elegible for claiming section 179 provision benefits and can claim expenses of upto $ 6,50,000 (maximum) for the current financial year as expenses under sectioin 179 which is its total taxable income earned through normal business operations. Therefore, total expense that can be claimed for year 2019 is $6,50,000.