Question

Maple Company acquires a new machine (seven-year property) on January 10, 2017, 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 2017 assuming Maple has taxable income of $800,000.

a. $125,000
b. $39,290
c. $17,863
d. $14,290
e. None of these choices are correct.

Answer 1

Maple Company can deduct the full cost of the machine, $125,000, as a tax deduction for 2017 since it is within the limits set by Section 179 and the company has enough taxable income to cover the expense.

Step-by-step explanation:

The question relates to calculating the tax deductions for a machine purchased by Maple Company in the context of United States tax laws, specifically under Section 179 of the IRS code. Since Maple Company has decided to expense the maximum amount under § 179, and the machine's cost is $125,000, which is within the limits allowed by the IRS for the year 2017, the entire cost of the machine can be expensed in the year of purchase. Given that Maple has a taxable income of $800,000, which is more than the cost of the equipment, they can deduct the full cost from their taxable income. Therefore, the total deductions related to the machine for 2017 would be the cost of the machine, which is a $125,000, option. The correct option is

a. $125,000