Question

1. Fariq purchases and places in service in 2017 personal property costing? $2,051,000. The property does not qualify for bonus depreciation. What is the maximum Sec. 179 deduction that Fariq can? deduct, ignoring any taxable income? limitation?

A. $479,000

B. ?$510,000

C. $0

D. ?$489,000

2. Chahana acquired and placed in service? $665,000 of equipment on August? 1, 2017 for use in her sole proprietorship. The equipment is 5?year recovery property. No other acquisitions are made during the year. Chahana elects to expense the maximum amount under Sec. 179. Assuming the property does not qualify for bonus?depreciation, Chahana's total deductions for the year? (including Sec. 179 and? depreciation) are

A. ?$643,000.

B. $510,000.

C. $133,000.

D. ?$541,000.

3. Terra? Corporation, a calendar?year taxpayer, purchases and places into service machinery with a 7?year life that costs? $650,000. Neither the mid?quarter convention, nor bonus depreciation apply. Terra elects to depreciate the maximum under Sec. 179.? Terra's taxable income for the year before the Sec. 179 deduction is?$700,000. What is? Terra's total depreciation deduction related to this property? (rounded to the nearest? dollar)?

A. $650,000

B. ?$92,885

C. ?$530,006

D. ?$602,885

4. This year Bauer Corporation incurs the following costs in development of new? products:

Laboratory supplies	?$ 55,000
Laboratory equipment purchased ??? ?(5minus?year recovery? property)	?50,000
Salaries? (lab personnel)	?90,000
Utilities	? 20,000
Total	?$215,000

No benefits are realized from the research expenditures until next year. If Bauer Corporation elects to expense the research? expenditures, the deduction is

A. ?$10,000 this year and? $175,000 next year.

B. ?$175,000 next year.

C. ?$175,000 this year.

D. ?$215,000 this year.

5. Ilene owns an unincorporated manufacturing business. In? 2017, she purchases and places in service? $2,036,000 of qualifying five?year equipment for use in her business. The property does not qualify for bonus depreciation. Her taxable income from the business before any Sec. 179 deduction is? $400,000. Ilene takes the maximum allowable deduction under section 179. Which of the following statements is true regarding the Sec. 179? election?

A. Ilene can deduct? $510,000 as a Sec. 179 deduction in? 2017, with no carryover to next year.

B. IIene can deduct? $400,000 as a Sec. 179 deduction in? 2017; $104,000 may be carried over to next year.

C. Ilene can deduct? $400,000 as a Sec. 179 deduction in 2017? ,with no carryover to next year.

D. Ilene can deduct? $504,000 as a Sec. 179 deduction in? 2017, with a? $6,000 carryover to next year.

Answer 1

Solution:-

1.

$489,000

Explannation:-

$2,051,000 - $2,030,000 limitation on property placed in service equals $21,000 reduction in Sec. 179 deduction. $510,000 - $21,000 equals $489,000 maximum deduction.

2.

$541,000

Explanation:-

Particulars	Amount
Section 179 immediate expensing	$510,000
MACRS Depreciation: Basis for depreciation: ($665,000 cost - $510,000 Sec. 179) * 0.20	31,000
Total depreciation	$541,000

3.

$530,006

Explanation:-

Particulars	Amount
Section 179 immediate expensing	$510,000
MACRS Depreciation: Basis for depreciation: ($650,000 cost - $510,000 Sec. 179) * 0.1429	20,006
Total depreciation	$530,006

4.

$175,000 this year.

Explanation:-

Particulars	Amount
Laboratory supplies	$55,000
Laboratory equipment ($50,000 * 0.20)	10,000
Salaries	90,000
Utilities	20,000
Total	175,000

5.

IIene can deduct $400,000 as a Sec. 179 deduction in? 2017; $104,000 may be carried over to next year.

Explanation:-

The maximum potential Sec. 179 deduction is $504,000 [$510,000 - ($2,036,000 - 2,030,000)], but it is further limited to Ilene's taxable income from the business. She has a carryover of $104,000 ($504,000 - 400,000).