Question

During 2019, Klecker, Inc. placed in service a new machine costing $3,000,000. How much can Klecker elect to immediately expense in 2019 under Code Sec. 179? Group of answer choices

$1,020,000

$2,550,000

$570,000

$400,000

Answer 1

Answer is option (c) $ 570000 under code sec.179

Section 179 of the United States Internal Revenue Code (26 U.S.C. § 179), allows a taxpayer to elect to deduct the cost of certain types of property on their income taxes as an expense, rather than requiring the cost of the property to be capitalized and depreciated. This property is generally limited to tangible, depreciable, personal property which is acquired by purchase for use in the active conduct of a trade or business.

For 2019 business tax purposes, the annual limits on Section 179 deductions are $1.02 million on individual items of equipment.Your business can spend up to a maximum of $2.55 million on Section 179 equipment. The deduction is reduced above this amount.

But here we are spending more than $2.55 million

You spend $3 million on equipment purchases. Your Section 179 deduction is $570,000, calculated by subtracting the amount that your purchase of $3 million exceeds $2,550,000 ($450,000) from the maximum deduction of $1,020,000.