In 2016, Company W elected under Section 179 to expense $19,300 of the cost of qualifying property. However, it could deduct only $15,000 of the expense because of the taxable income limitation. In 2017, Company W's taxable income before any Section 179 deduction was $812,000. Compute its 2017 Section 179 deduction if the total cost of qualifying property purchased in 2017 was $508,000.
Section 179 allows assessee to charge the whole of the investment in the long-term as depreciation expense in the first year of its' use but, the asset should be placed for more than a six-month period.
Answer and Explanation:
During 2017, Section 179 deduction is $508,000.
Explanation: During 2017, Section 179 deduction is $508,000 which is lower of investment amount and the allowed deduction.
Working Note: The maximum allowed deduction under section 179 is 80% of the current year profit i.e. $649,600 ($812,000 x 80%).
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from Financial Accounting: Help and ReviewChapter 5 / Lesson 14