Year of 2018 Required information [The following information applies to the ques
ID: 2342907 • Letter: Y
Question
Year of 2018
Required information
[The following information applies to the questions displayed below.]
Dain’s Diamond Bit Drilling purchased the following assets this year.
Assume its taxable income for the year was $61,250 for purposes of computing the §179 expense (assume no bonus depreciation). (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Leave no answer blank. Enter zero if applicable.)
d. If the January drill bits’ basis was $30,123,500, what is the maximum amount of §179 expense Dain may deduct for the year?
Purchase Original Asset Date Basis Drill bits (5-year) Jan-22 $ 114,000 Drill bits (5-year) Jul-19 123,500 Commercial building Jul-11 238,000 TABLE 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period Year 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year 33.33% 44.45 14.81 7.41 20.00% 32.00 19.20 11.52 11.52 5.76 14.29% 24.49 17.49 12.49 8.93 8.92 8.93 4.46 10.00% 18.00 14.40 11.52 9.22 7.37 6.55 6.55 6.56 6.55 3.28 5.00% 9.50 8.55 7.70 6.93 6.23 5.90 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 3.750% 7.219 6.677 2 3 4 5 6 7 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231 9 10 12 16 17 18 19 20Explanation / Answer
a
Maximum section 179 deduction is limited to taxable income before 179 deduction. Thus, section 179 deduction is 61250
Depreciation on building is = 238000*1.177%=2801.26
b
Since the basis of the personal property assets placed in service is in excess of 3.5Million no section 179 deduction available.
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