Back in Boston, Steve has been busy creating and managing his new company, Teton Mountaineering (TM), which is based out of a small town in Wyoming. In the process of doing so, TM has acquired various types of assets. Below is a list of assets acquired during 2013:
Asset ........................... Cost ................... Date Place in Service
Office furniture ................ $10,000 .................. 02/03/2013
Machinery .................. 560,000 .................. 07/22/2013
Used delivery truck* ........ 15,000 .................... 08/17/2013
*Not considered a luxury automobile, thus not subject to the luxury automobile limitations
During 2013, TM had huge success (and had no §179 limitations) and Steve acquired more assets the next year to increase its production capacity. These are the assets acquired during 2014:
Asset ............................ Cost ........... Date Place in Service
Computers & Info. System .... $40,000 ............ 03/31/2014
Luxury Auto† .................. 80,000 ............. 05/26/2014
Assembly Equipment .......... 475,000 ............. 08/15/2014
Storage Building ................ 400,000 ............ 11/13/2014
TM generated taxable income in 2014before any §179 expense of $732,500 (assume bonus depreciation and the 2013 §179 limitations are extended to 2014).
Required
a. Compute 2013 depreciation deductions including §179 expense (ignoring bonus depreciation).
b. Compute 2014depreciation deductions including §179 expense (ignoring bonus depreciation).
c. Compute 2014depreciation deductions including §179 expense, but now assume that Steve would like to take bonus depreciation.
d. Ignoring part c, now assume that during 2014, Steve decides to buy a competitor's assets for a purchase price of $350,000.Compute maximum 2014cost recovery including §179 expense (ignoring bonus depreciation). Steve purchased the following assets for the lump-sum purchase price.
Asset ........................... Cost .......... Date Placed in Service
Inventory ........................ $20,000 ........ 09/15/2014
Office furniture ............... 30,000 .......... 09/15/2014
Machinery .................. 50,000 ............. 09/15/2014
Patent .......................... 98,000 ............... 09/15/2014
Goodwill ..................... 2,000 ............... 09/15/2014
Building ...................... 130,000 ............. 09/15/2014
Land ......................... 20,000 ................ 09/15/2014
e. Complete Part I of Form 4562 for part b.