Jose is considering acquiring a new luxury automobile costing $45,000 that will be used 100% in his business. The salesperson at the automobile dealership states that Jose will be entitled to substantial tax benefits in the initial year (2015) including:
If Sec. 179 is elected:
• A deduction of $25,000 of the acquisition cost under Sec. 179, and a $4,000 ($20,000 × 0.2) depreciation deduction, for total deductions of $29,000.
If Sec. 179 is not elected:
• A $9,000 ($45,000 × 0.2) depreciation deduction.
a. Are the salesperson’s assertions relative to the tax benefits accurate? Explain.
b. Would your answer to Part a differ if the automobile were used only 60% for business purposes?
c. Would your answer to Part a differ if Jose instead were to lease the automobile?
d. Would your answers to Part a differ if the vehicle were a large SUV (gross vehicle weight rating (GVWR) greater than 6,000 pounds) rather than an automobile?