Problem - 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 2010:
|
Asset
|
Cost
|
Date Place in Service
|
|
Office equipment
|
$10,100
|
2/3/2010
|
|
Machinery
|
646,000
|
7/22/2010
|
|
Used delivery truck*
|
21,700
|
8/17/2010
|
* Not considered a luxury automobile, thus not subject to the luxury automobile limitations
During 2010, 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 that were acquired during 2011:
|
Asset
|
Cost
|
Date Place in Service
|
|
Computers & info. system
|
$64,000
|
3/31/2011
|
|
Luxury auto†
|
$83,000
|
5/26/2011
|
|
Assembly equipment
|
$437,500
|
8/15/2011
|
|
Storage building
|
$484,000
|
11/13/2011
|
† Used 100 percent for business purposes.
TM did extremely well during 2011 by generating a taxable income before any §179 expense of $1,105,000.
Required -
a. Compute maximum 2010 depreciation deductions including §179 expense (ignoring bonus depreciation).
b. Compute maximum 2011 depreciation deductions including §179 expense (ignoring bonus depreciation).
c. Compute maximum 2011 depreciation deductions including §179 expense (ignoring bonus depreciation) but now assume that Steve acquired a new machine on October 2 for $426,500 plus $5,000 for delivery and set up costs.
d. Ignoring part (c), now assume that during 2011, Steve decides to buy a competitor's assets for a purchase price of $482,200. Steve purchased the following assets for the lump-sum purchase price.
|
Asset
|
Cost
|
Date Place in Service
|
|
Inventory
|
$21,250
|
9/15/2011
|
|
Office furniture
|
50,250
|
9/15/2011
|
|
Machinery
|
71,500
|
9/15/2011
|
|
Patent
|
134,500
|
9/15/2011
|
|
Goodwill
|
4,200
|
9/15/2011
|
|
Building
|
177,000
|
9/15/2011
|
|
Land
|
23,500
|
9/15/2011
|