Question

Chaz Corporation has taxable income in 2018 of $452,000 for purposes of computing the §179 expense and acquired the following assets during the year:

Assume that the qualified improvement property has satisfied the conditions mentioned under Section 179(f)(2).

Placed in

Asset Service Basis

Office furniture September 12 $ 781,000

Computer equipment February 10 906,000

Delivery truck August 21 53,000

Qualified improvement property September 30 1,507,000

Total $ 3,247,000

What is the maximum total depreciation deduction that Chaz may deduct in 2018? (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

Answer 1

Asset	Original Basis	§179 Depreciation expense	Remaining Basis	Bonus Depreciation 50%	Remaining Basis	MACR Rate	Depreciation expenses
Office furniture (7 years)	$781,000.00	$253,000.00	$528,000.00	$264,000.00	$264,000.00	14.29%	$37,725.60
Computer equipment (5 years)	$906,000.00		$906,000.00	$453,000.00	$453,000.00	20.00%	$90,600.00
Delivery truck (5 years)	$53,000.00		$53,000.00	$26,500.00	$26,500.00	20.00%	$5,300.00
Qualified improvement property (100% bonus depreciation)	$1,507,000.00		$1,507,000.00	$1,507,000.00	$0.00
Total	$1,740,000.00	$253,000.00		$743,500.00
§179 Depreciation expense							$253,000.00
Total Bonus Depreciation							$743,500.00
Total Depreciation Expenses							$1,130,125.60
Chaz will receive the most benefit by applying the §179 amount to the furniture 7­year property.
§179 Depreciation expense
Property placed in service (a)		$3,247,000.00
Threshold for §179 phase­out (b)		$2,500,000.00
Phase­out of maximum §179 expense (c)		$747,000.00
Maximum 179 expense before phase­out (d)	$1,000,000.00
Phase­out of maximum §179 expense (c)	$747,000.00
Maximum §179 expense after phase­out (d-c)	$253,000.00