ACC $454$ Spring $2024$

MACRS Excel Exercise

Facts:

Steed and Peel, Ltd$.($S&P$)$ is a new concept upscale $$Sandwich Shoppe$($deli$)$ in the North Scottsdale$/$Carefree

area$\mathrm{.}1$ In early $2021,$ the owners purchased a vacant delicatessen$/$convenience store, made a few cosmetic

renovations $($the location was a little shabby by local standards$)$ and opened for business. Catering $($no pun

intended$)$ mostly to the overly affluent and largely inert, the shop prepares custom gourmet sandwiches, salads

and related items, with premium organic and locally sourced ingredients. S&P then promptly delivers these

concoctions to the homes and offices of its clientele $($with far more cachet than one of the commercial delivery

services$).$ In its first tax year $($calendar $2021),$ S&P netted $$740,000$ in taxable profit $-$ it expects to clear well

over $$1,380,000$ in $2022($both figures are before any recovery deductions$).$ S&P$$s timing was fortuitous as

with related to the COVID pandemic, the food delivery business skyrocketed. To help keep up with demand

and generally spruce$-$up the physical facilities in deference to their location, S&P made the following capital

expenditures in $2022$:

Description Date Acquired Cost

Executive Vehicle $($Jaguar$)6/6/2022105,713$$

Meat Slicers & Related Food Service $($Note $-$

Used Eqpt.$)2/16/2022279,201$

Walk$-$in Cooler & Related $7/30/2022512,106$

Furniture & Fixtures $4/30/2022147,341$

Computers & Peripherals $3/15/202257,255$

Canned software $-$ business applications $11/14/202238,667$

Delivery$/$Cargo Trucks $(3-$ each GVW

$9,500$ lbs$.)10/2/2022174,324$

Real Property Improvements $-$ Building

Expansion$/$Construction Costs $9/28/2022655,613$

Project Requirements:

In general, S&P$$s owners $($it is a $$C$$ corporation$)$ want to maximize first$-$year tax depreciation and related

deductions. In this context, they also hope to avoid keeping annual depreciation records, if possible. However,

after conferring with their financial and legal advisors, related to certain financial covenants and regulatory

issues $($beyond our scope here$),$ S&P will only consider claiming $$bonus depreciation$$ for software acquisitions,

if such a bonus allowance is otherwise available. Given the foregoing, your task is to determine how best to

$1$ For students not familiar with the metropolitan Phoenix area, North Scottsdale$/$Carefree is generally considered a $$toney$$

community $$ an Arizona version of La Jolla, Beverly Hills or Westchester.

Page $2$

achieve S&P$$s overall goals relative to depreciation and related deductions. In other words, taking into

account the business constraints, how do you apply the federal tax law to maximize their $2022$ deductions and

minimize the record$-$keeping burden? Please make sure you consider all these elements when completing the

MACRS Template provided as part of this project $$ you should do your best to compute the maximum

deduction. Also, do not forget the deduction ordering rules associated with the various IRC provisions

discussed in your text and lecture materials. In addition, along the way, you will likely need to do a little

additional research $($the template has been partially completed for you$/$examples provided $-$ see the purple and

italicized type font$)$ to determine the appropriate recovery period for certain assets. As discussed in your lecture

materials, Revenue Procedure $87-56$ is a great place to look for such answers. A copy of that Rev. Proc. is

included on Canvas with the other project materials. You can also use CCH AnswerConnect$/$VitalLaw or RIA

Checkpoint to expand or practice your research if desired, or if you have forgotten about MACRS conventions

or GDS methods from your lectures. Of course, you can always review the lectures and$/$or your text as well.

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