Question

In this assignment, assume that the Sec. 179 and bonus depreciation tax apply to the 2020 tax year where applicable.

1. For a-d, determine the total depreciation amount for 2020 assuming the taxpayer opted out of Sec. 179 and bonus if they were available in the year of purchase. In addition, assume all taxpayers use a calendar year tax period and that the property mentioned was the only property purchased in the year of acquisition.
   
   

	Details at purchase	Total depreciation
a	A bank purchased a new building for its headquarters, totaling $2 million on April 1, 2017.
b	A dentist purchased 10 new chairs and a couch for the waiting room, which cost $3,000 on October 15, 2020.
c	A restaurant purchased booths and chairs totaling $15,000 on November 1, 2020 and kitchen equipment costing $4,000 on June 15, 2020.
d	A telemarketing company purchased a separate computer, office chair, and desk for each of its new staff on January 15, 2019. The total costs for the computers, office chairs, and desks was $30,000, $3,000, and $8,000, respectively.
e.	A moving company purchased a lightweight truck, which cost $38,650 on March 8, 2016.

Answer 1

Section 179 of the IRC (Bonus Depreciation)

• Allows businesses to take an immediate deduction for business expenses related to depreciable assets such as equipment, vehicles, and software.
• Section 179 is limited to a maximum deduction of $1,040,000 and a value of property purchased to $2,590,000 for the year 2020.

(a) As per Sec 179 of IRC purchase of building is ineligible for the deduction.

(b) As per Sec 179 0f IRC only equipment’s, vehicles and software are only eligible remaining assets are not eligible for bonus depreciation hence purchase of chairs are ineligible.

(c) Cost involved in purchase of booths and chairs are ineligible purchases but kitchen equipment costing $ 4000 is eligible for 100% depreciation under sec 179 of the IRC

(d) As per IRC computer is equipment eligible for deduction under Sec 179 of the IRC so the entire cost $30,000 is eligible for deduction.

(e) The sec 179 benefit is made available to the business from 2018 and hence the assets purchased in 2016 is ineligible for the deprication u/s 179and it should be claimed in the first year itself.