1) Large Corporation acquired and placed in service the following 100% business-use alerts. Large did not elect Sec. 179 expensing on any of these properties, and elected out of bonus depreciation for all of them.
Truck (light-duty, modified non-personal use) costing $36,000: Placed in service on March 3, 2013 with a 5-year MACRS recovery period.
Machinery costing $85,000: Placed in service on November 15, 2013 with a 7-year MACRS recovery period.
Land costing $90,000: Placed in service on October 12, 2013.
Building costing $280,000: Placed in service on December 4, 2013 with a 39-year MACRS recovery period.
a) a) What is Large's total depreciation deduction in 2013?
b) b)Large Corporation sells the machinery on February 2, 2015 and sells the building on September 18, 2015. What are the adjusted bases of these two assets on the dates of sale (compute accumulated depreciation to date of sale)?
2) In July 2013, Tish acquires and places in service a business machine costing $450,000 with a 7-year MACRS recovery period. Tish elects the maximum allowable Sec. 179 expense on the machine but elects out of bonus depreciation. In August 2013, she also places in service business equipment costing $1,650,000, with a 5-year MACRS recovery period. Tish's taxable income (before the Sec. 179 expense and the 50% of SE tax deduction) is $310,000.
a) What is Tish's allowable 2013 Sec. 179 expense on the machine? What amount can she carry over to 2014?
b) What is Tish's total 2013 depreciation deduction?
c) What are the limitations on Tish's ability to use the Sec. 179 carryover in 2014?
d) How would your answer to Part a change if Tish's business taxable income (before the Sec. 179 expense and the 50% of SE tax deduction) were $525,000 in 2013 instead of $310,000?
3) On January 1 of the current year, Palm Corporation purchases the net assets of Vicki's unincorporated business for $600,000. The tangible net assets have a $300,000 book value and a $400,000 FMV. The purchase agreement states that Vicki will not compete with Palm Corporation by starting a new business in the same area for a period of five years. The stated consideration received by Vicki for the covenant not to compete is $50,000. Other intangible assets included in the purchase agreement are as follows:
Goodwill: $70,000
Patents: (12-year remaining legal life) $30,000
Customer list: $50,000
a) How would Vicki's assets be recorded for tax purposes by Palm Corporation?
b) What is the amortization amount for each intangible asset in the current year?