Problem 1: Blackwell Corp. acquires a machine (seven-year property) on January 10, 2016 at a cost of $2,022,000. Blackwell makes the election to expense the maximum amount under Sec. 179.
Assume that the taxable income from trade or business is $1,500,000.
(1) What is the amount of the Section 179 expensing deduction for the current year?
(2) What is the amount of the Section 179 carryover to the next tax year?
(3) What is the amount of depreciation allowed?
Assume instead that the taxable income from trade or business is $400,000.
(1) What is the amount of the Section 179 expensing deduction for the current year?
(2) What is the amount of the Section 179 carryover to the next tax year?
(3) What is the amount of depreciation allowed for 2016?
Problem 2: Jackie, a calendar-year taxpayer, acquires 5-year tangible personal property in 2016 and places the property in service on the following schedule:
Date placed in service Acquisition Cost
January 15 $7,000
May 25 10,000
November 8 508,000
Jackie elects to expense the maximum under Sec. 179, and selects the property placed into service on November 8. The property is not eligible for bonus depreciation. Her business's taxable income before Sec. 179 is $790,000. What is the total cost recovery deduction (depreciation and Sec. 179) for 2016?