Question

Maple Company acquires a new machine (seven-year property) on January 10, 2015, at a cost of 125,000. Maple makes the election to expense the maximum amount under § 179. No election is made to use the straight-line method. Maple does not take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machine for 2015 assuming Maple has taxable income of 800,000.

1) 14,290
2) 39,290
3) 125,000
4) 17,863
5) None of these choices are correct.

Answer 1

The total deduction related to the new machine for 2015 under Section 179 is $125,000, assuming Maple Company has taxable income of $800,000 and elects to expense the maximum amount allowed without additional first-year depreciation or straight-line method.

Step-by-step explanation:

The student is asking about the deductions available for a new machine purchased by Maple Company under Section 179 of the Internal Revenue Code. Given that Maple acquired the machine at a cost of $125,000 on January 10, 2015, and has taxable income of $800,000, without taking additional first-year depreciation or electing the straight-line method, the total deductions related to the machine for 2015 would be the maximum amount allowed under § 179, which for 2015 was $500,000. Therefore, if the company elects to expense the maximum amount, the total deduction in 2015 would be the full cost of the machine, or $125,000. This is because Maple's taxable income is sufficient to cover the full expensing of the asset under Section 179. As a result, the correct answer to the student's question is 3) $125,000.