AMP Corporation (calander-year-end) has 2015 taxable income of $900,000 before t
ID: 2460445 • Letter: A
Question
AMP Corporation (calander-year-end) has 2015 taxable income of $900,000 before the 176 empense. During 2015, AMP acqured the followig assets:
Asset Period of service Basis
Machinery September 12 $ 1,550,000
Computer Equipement February 10 365,000
Office building April 2 480,000
Total $ 2,395,000
a) What is the maximum amount of 179 expense AMP may deduct for 2015 (assume the 2014 179 limits are expentded to 2015?
b) What is the maximum total depreciation exense, including 179 expense, assuming n bonus depreciattion (assume the 2014 179) limits are extend to 2015?
Explanation / Answer
Ans a Under section 179 the maximum deduction for 2015 is $500000 subject to qualifying asset not exceeding $2 million. Real property such as office building is not a qualifying assets. Quallifying Assets Machinery $1,550,000 Computer Equipment 365000 Total $1,915,000 Maximun allowed ded under section 179 500000 So this $500000 should be applied on Machinery first totally as it is a 7 year property as compare to Computer Equipment which is a 5 year property for calculation of MACRS depreciation So we will have maximum advantage applying $500000 to Machinery Ans is $500000 under section 179 Ans b Actual Basis sec 179 Remaining Basis (Amount) % of depreciation half year convention % Depreciation Expense Machinery (7 year) $1,550,000 500000 $1,050,000 14.29% $150,045.00 Computer Equipment (5 year) 365000 365000 20% $73,000.00 Office Building (39 years) 480000 480000 1.819% $8,731.20 Total $231,776.20 Sec 179 500000 Total Depreciation Expense $731,776.20 Ans
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