Nora owns a bakery that has been in business for three years. She has reached out to you, her CPA, for advice as she is planning on expanding her business and
buying some equipment for her store. She has heard quite a bit from her fellow business owners about bonus depreciation and the ability to take an extra
deduction in year one. She needs some advice on whether the assets qualify. She is planning on buying a new oven priced at $10,000, a new bakery display case
priced at $5,000, a new connected refrigerator and freezer priced at $7,000, and a used commercial mixer priced at $5,000, and she plans to add some leasehold
improvements to the building (work on air condition duct and roofing) priced at $20,000. Her business has been profitable for the last couple of years, averaging
$500,000 a year. In a short memorandum, advise how she can apply depreciation, bonus depreciation, and any other special depreciation available for these
assets she will place into service on 2/1/2016. Be specific in regard to code sections or any other primary or secondary sources. You will find a memorandum
template in Chapter 11 of the Federal Tax Research textbook.
Specifically, the following critical elements must be addressed:
I. Bonus Depreciation and Extra Deduction
A. Identify sources for evaluating appropriate tax situation
B. Document research performed to determine if bonus depreciation applies to tax year and specific assets C. Apply research to specific assets and determine amount of deduction
D. Document findings and advice in a memo to the client, including supporting details
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