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 2014: (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

Asset	Cost		Date Placed in Service
Office furniture	$	10,000	02/03/2014
Machinery		560,000	07/22/2014
Used delivery truck*		15,000	08/17/2014

* Not considered a luxury automobile, thus not subject to the luxury automobile limitations.

During 2014, 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 2015:

Asset	Cost		Date Placed in Service
Computers & info. system	$	40,000	03/31/2015
Luxury auto		80,000	05/26/2015
Assembly equipment		475,000	08/15/2015
Storage building		400,000	11/13/2015

Used 100% for business purposes.

TM generated a taxable income in 2015 before any 179 expense of $732,500. Assume bonus depreciation and the 2014 179 limitations are extended to 2015.

2.

value: 33.33 points

Required information

a.	Compute maximum 2014 depreciation deductions including 179 expense (ignoring bonus depreciation).

b.	Compute maximum 2015 depreciation deductions including 179 expense (ignoring bonus depreciation).

c.	Compute maximum 2015 depreciation deductions including 179 expense, but now assume that Steve would like to take bonus depreciation on the 2015 assets.

d.	Ignoring part (c), now assume that during 2015, Steve decides to buy a competitors assets for a purchase price of $350,000. Compute maximum 2015 cost 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	09/15/2015
Office furniture		30,000	09/15/2015
Machinery		50,000	09/15/2015
Patent		98,000	09/15/2015
Goodwill		2,000	09/15/2015
Building		130,000	09/15/2015
Land		20,000	09/15/2015

References

eBook & Resources

ProblemLearning Objective: 10-02 Determine the applicable cost recovery (depreciation) life, method, and convention for tangible personal and real property and calculate the deduction allowable under basic MACRS.Learning Objective: 10-05 Explain cost recovery of natural resources and the allowable depletion methods.

Difficulty: 3 HardLearning Objective: 10-03 Explain the additional special cost recovery rules (179, bonus, listed property) and calculate the deduction allowable under these rules.

Learning Objective: 10-01 Explain the concept of basis and adjusted basis and describe the cost recovery methods used under the tax law to recover the cost of personal property, real property, intangible assets, and natural resources.Learning Objective: 10-04 Explain the rationale behind amortization, describe the four categories of amortizable intangible assets, and calculate amortization expense.