Problem 1

Kondar Corporation (a calendar-year taxpayer) spent $2,050,000 to purchase used machinery in February 2014.

a. What was the maximum that Kondar could elect to expense under Section 179?

b. What was the basis for calculating regular MACRS depreciation on this machinery if the maximum Section 179 deduction was elected?

c. What was Kondar's total depreciation deduction for 2014?

d. What is Kondar's depreciation deduction for this machinery for 2015?

Problem 2

Byron entered into a 36-month lease of an automobile on March 1, year 1. He used it 80 percentfor business and 20 percent for personal use. In year 2 he used it 90 percent for business and 10 percent for personal use. The fair market value of the automobile at the inception of the lease was $60,000. Byron made 10 monthly lease payments of $660 in year 1 and 12 monthly payments in year 2.

The IRS lease inclusion table amounts are $80 for the first year and $160 for the second year.

a. What is Byron's deduction for lease payments made during year 1?

b. What is his deduction for year 2?

c. What is the lease inclusion amount that Byron must include in his gross income for year 1?

d. What amount must he include in income for year 2?