Question

Assume that Sivart Corporation has 2022 taxable income of $1,750,000 for purposes of computing the §179 expense and acquired several assets during the year. Assume the delivery truck does not qualify for bonus depreciation. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

Asset Placed in Service Basis
Machinery June 12 $ 1,440,000
Computer equipment February 10 70,000
Delivery Truck—used August 21 93,000
Furniture April 2 310,000
Total $ 1,913,000
a. What is the maximum amount of §179 expense Sivart may deduct for 2022?
b. What is the maximum total depreciation (§179, bonus, MACRS) that Sivart may deduct in 2022 on the assets it placed in service in 2022?

Answer 1

a. The maximum amount of §179 expense deduction for 2022 is $1,050,000. b. The maximum total depreciation for assets placed in service in 2022 can be calculated by combining the §179 expense deduction, bonus depreciation, and MACRS depreciation.

Step-by-step explanation:

a. To determine the maximum amount of §179 expense that Sivart may deduct for 2022, you need to refer to the IRS limits. For 2022, the maximum §179 expense deduction is $1,050,000. However, this limit is reduced dollar for dollar once the total cost of qualified property exceeds $2,620,000. In this case, the total cost of qualified property is $1,913,000, which is below the threshold, so the maximum deduction is $1,050,000.

b. To calculate the maximum total depreciation, you need to consider the §179 expense deduction, bonus depreciation, and MACRS depreciation. The §179 expense deduction is $1,050,000. The delivery truck does not qualify for bonus depreciation, so the remaining assets are eligible for bonus depreciation. For these assets, you can deduct 100% of the remaining basis in the first year. The remaining basis is $1,913,000 - $93,000 = $1,820,000. Finally, you can calculate the MACRS depreciation using the MACRS tables provided by the IRS.