Sim05 - Links to Worksheets in File Introduction Questions...

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Links to Worksheets in FileFactsYear 1Year 2Year 3Year 4Year 5Year 625%25%30%30%35%35%Assume that she has a 2% discount rate.IssueShould Alicia elect to expense the entire cost of her investment in these assets, in the year of acquisition?Alicia is a cash basis taxpayer who uses a calendar year tax reporting period. Her primary source of income is from an accounting practice that she runs as a sole-proprietorship (reported on Form 1040, Schedule C).She has decided to make her operations "paperless" and needs to invest $100,000 in the current year in new digital technologies with 5-year class lives. She estimates that this investment will increase both the efficiency of her firm and its net profit before depreciation. As a consequence, she expects her marginal tax rates to be increasing over the life of the investment:IntroductionQuestionsAnalysisAuthoritiesInternal Revenue Code (IRC) §1 imposes a tax on an individual's taxable income. IRC §63 defines taxable income to mean gross income, which generally includes all income from whatever source derived (per §61) minus allowable deductions.Section 162 authorizes deductions for the ordinary and necessary expenditures incurred in the conduct of a trade or

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