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In 2016, Company W elected under Section 179 to expense $19,300 of the cost of qualifying...

Question:

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:

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%).


Learn more about this topic:

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How to Calculate Depreciation Expense: Definition & Formula

from Financial Accounting: Help and Review

Chapter 5 / Lesson 14
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