Tax+Problem+1+Key+_Depreciation+Exercise_ - A329 Fall 2010...

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A329 Fall 2010 Name_____________________________________ Professor Owen Depreciation Exercise In May 2010 Baxter Company spent $850,000 to purchase a fleet of delivery trucks and some desks for the office. Of the $850,000 total, $200,000 was spent on used trucks, $500,000 on new trucks, and the remaining $150,000 was spent on new desks. Baxter’s taxable income before any deductions related to the property was $550,000. No other assets were purchased in 2010. A. How much are Baxter’s cost recovery deductions (MACRS, Sec 179 Exp, 50% Bonus) related to the property for 2010? SECTION 179 EXPENSE: Excess Purchases Limitation : Maximum Allowable Amount $250,000 Reduced by Purchases > $800,000 (50,000) Adjusted Allowable 179 Expense 200,000 Taxable Income Limitation: N/A (Taxable Income > 179 Amt) Cost of Used Trucks (Best Case Scenario) 200,000 179 Expense (200,000) Remaining Cost of Used Trucks 0 Adj Basis for Bonus Deprec (Use for new truck and Desks) 650,000 50% Bonus Depreciation (New Trucks)
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Tax+Problem+1+Key+_Depreciation+Exercise_ - A329 Fall 2010...

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