Question

Label the following as "True" or "False" regarding the definition of taxable income as it is used in limiting the § 179 expensing amount.

a. The taxable income computation for purposes of the § 179 limit includes the deduction for MACRS.
b. Taxable income of a trade or business is computed without regard to the amount expensed under § 179.
c. The aggregate amount of taxable income includes net income from a trade or business as well as from the production of income activities.
d. The taxable income computation for purposes of the § 179 limit excludes the deduction for additional first-year depreciation.

Answer 1

a. False. The taxable income computation for purposes of the § 179 limit does not include the deduction for MACRS. b. False. Taxable income of a trade or business is computed with regard to the amount expensed under § 179. c. True. The aggregate amount of taxable income includes net income from a trade or business as well as from the production of income activities. d. False. The taxable income computation for purposes of the § 179 limit includes the deduction for additional first-year depreciation.

Step-by-step explanation:

a. False. The taxable income computation for purposes of the § 179 limit does not include the deduction for MACRS. MACRS is the Modified Accelerated Cost Recovery System, which allows businesses to recover the cost of certain property over a specified period of time. It is not considered taxable income.

b. False. Taxable income of a trade or business is computed with regard to the amount expensed under § 179. § 179 allows businesses to deduct the cost of qualifying property in the year it is placed in service, rather than depreciating it over time.
c. True. The aggregate amount of taxable income includes net income from a trade or business as well as from the production of income activities. This means that income from both sources is considered when calculating taxable income.
d. False. The taxable income computation for purposes of the § 179 limit includes the deduction for additional first-year depreciation. Additional first-year depreciation is another tax deduction that allows businesses to deduct a certain percentage of the cost of qualifying property in the first year it is placed in service.