Question

The basis of an asset on which $20,000 has been expensed under § 179 will be reduced by $20,000, even if $20,000 cannot be expensed in the current year because of the taxable income limitation.

a) True
b) False

Answer 1

The statement is False. The basis of an asset on which $20,000 has been expensed under § 179 will not be reduced by $20,000 if it cannot be expensed in the current year due to the taxable income limitation.

Step-by-step explanation:

The statement is False. The basis of an asset on which $20,000 has been expensed under § 179 will not be reduced by $20,000 if it cannot be expensed in the current year due to the taxable income limitation. Section 179 of the Internal Revenue Code allows businesses to expense the cost of certain assets up to a certain amount. However, the expense is subject to a taxable income limitation.

If the taxable income is not sufficient to fully expense the asset, the remaining amount cannot be carried forward or deducted in future years. Therefore, the basis of the asset will not be reduced by $20,000 if it cannot be expensed in the current year.