Back in Boston, Steve has been busy creating and managing his new company, Teton Mountaineering (TM), which is based out of a small town in Wyoming. In the process of doing so, TM has acquired various types of assets. Below is a list of assets acquired during 2014:
| Asset |
Cost |
Date Placed in Service |
|
Office furniture
|
$ 10,000
|
02/03/2014
|
|
Machinery
|
560,000
|
07/22/2014
|
|
Used delivery truck*
|
15,000
|
08/17/2014
|
*Not considered a luxury automobile, thus not subject to the luxury automobile limitations.
During 2014, TM had huge success (and had no §179 limitations) and Steve acquired more assets the next year to increase its production capacity. These are the assets acquired during 2015:
|
Asset
|
Cost
|
Date Placed in Service
|
|
Computers & Info. System
|
$ 40,000
|
03/31/2015
|
|
Luxury Auto†
|
80,000
|
05/26/2015
|
|
Assembly Equipment
|
475,000
|
08/15/2015
|
|
Storage Building
|
400,000
|
11/13/2015
|
|
†Used 100% for business purposes.
|
|
|
TM generated a taxable income in 2015 before any §179 expense of $732,500 (assume bonus depreciation and the 2014 §179 limitations are extended to 2015).
Required
a) Compute maximum 2014 depreciation deductions including §179 expense (ignoring bonus depreciation).
b) Compute maximum 2015 depreciation deductions including §179 expense (ignoring bonus depreciation).
c) Compute maximum 2015 depreciation deductions including §179 expense, but now assume that Steve would like to take bonus depreciation.
d) Ignoring part (c), now assume that during 2015, Steve decides to buy a competitor's assets for a purchase price of $350,000. Compute maximum 2015 cost recovery including §179 expense (ignoring bonus depreciation). Steve purchased the following assets for the lump-sum purchase price.
| Asset |
Cost |
Date Placed in Service
|
|
Inventory
|
$ 20,000
|
09/15/2015
|
|
Office furniture
|
30,000
|
09/15/2015
|
|
Machinery
|
50,000
|
09/15/2015
|
|
Patent
|
98,000
|
09/15/2015
|
|
Goodwill
|
2,000
|
09/15/2015
|
|
Building
|
130,000
|
09/15/2015
|
|
Land
|
20,000
|
09/15/2015
|
e) Complete Part I of Form 4562 for part (b).