Name____________________
Class Time________________

EXERCISE – 25
DEPRECIATION ON PERSONALTY

Assume Juliana Jones opened a restaurant this year. On February 1st she bought some new kitchen equipment and dining room furniture for $420,000. She bought a new copier and new computer for $250,000 on 9/12. She is just renting the building. What is the most she can deduct in some type of depreciation write off for the current year?

[Assumes 179+Bonus 50% extended to 2014]

T179
RB
50%
RB
DDB
Feb 1 (New) 7 yr Equip & Furn
$420,000 (420K)
0
0
0
0
Sep 12 (New) 5 yr Hi tech
$250,000 (80K)
170K
(85K)
85K/5 x 2 x ½
= 17,000
Total TPP 670,000 (500K)

∑ = $602,000 Total deductions

Name_________________
Class Time_____________

EXERCISE – 26
COST RECOVERY

Assume: $2,140,000 airplane bought in August.

1. What is the CY maximum deduction if taxpayer does not elect bonus or Section 179 methods?

[Assuming 50% bonus + §179] 2,140,000 / 5 * 2 * ½ = $428,000

2. How much is the (maximum) CY deduction if it is a new airplane?
[If 2013 rules extended & elections made]

2,140,000
-2,000,000
X 140,000 500,000
§179 = 360,000 ∑ = $1,428,000 deductions

$428,000 deduction

3. How much tax will be saved by the CY Deduction if the taxpayer is in the 35% tax bracket and it is a used airplane?
With 2013 rules:
Used ≠ Bonus
1-§179 RB 2- Bonus RB DDB
2,140,000 360K 1,780,000 N/A 1,780K /5x2x.5 =356K

∑ = $716,000
*.35
$250,600 Tax Saved Name__________________ Class