Bill is the owner and CEO of Blue Trucking Co. Bill noticed that Blues small fleet of 5 pickup trucks is aging considerably and that the fleet is starting to have mechanical problems. Therefore, Blue disposes of its old fleet and purchases 5 new semi-trucks that cost $100,000 each. The trucks are placed in service on January 1, 2018. Bill thinks that the new fleet and other factors will cause a sharp increase in revenue for Blue in 2018. Bob has not purchased any other property during the year.

a. May Bill deduct depreciation expense for the trucks? Which code section and regulation provide Bill permission to deduct the trucks depreciation?

b. What code section should be used to determine the initial cost basis needed to calculate depreciation for the semi-trucks?

c. Are there rules that might allow Bill to skip depreciation on the trucks and expense all of his costs in 2018? Which statutory provisions allow this? (See IRC 168 and 179)

i. Are there any factual tests that Bill must satisfy to take bonus depreciation?

ii. Are there any factual tests that Bill must satisfy to take a code section 179 deduction?

iii. Will the deduction for bonus depreciation or code section 179 lower Bobs cost basis in the trucks?

iv. My Bill decline to deduct bonus depreciation or a code section 179 deduction on the trucks?

d. Assume that Bill declines to deduct 179 or bonus depreciation amounts. What part of the year is Bill deemed to have placed the trucks into service?

i. Does this change if Bob purchased all of the trucks on December 1, 2018? Does the code section 179 deduction affect this calculation? (See Treas. Reg. 1.168(d)-1)

e. Assume that Bill declines to deduct 179 or bonus depreciation amounts. Is the tax method used to calculate non-real estate depreciation (MACRS) similar to other depreciation methods you have learned about in accounting? What are the similar methods? When is there a switch from one method to another? (See IRC 168)

f. Assume that Bill declines to deduct 179 or bonus depreciation amounts. Will Bobs depreciation deduction lower his cost basis used to calculate the gain on the sale of the trucks? Will Bobs depreciation deduction lower his basis used to calculate depreciation on the trucks?

g. Assume that Bill declines to deduct 179 or bonus depreciation amounts. What is Bobs presumed salvage value if he uses the MACRs system of depreciation?

h. Assume that Bill declines to deduct 179 or bonus depreciation amounts. What is the presumed general depreciation amount for the trucks if: (See Rev. Proc. 87-56).

i. the trucks are considered Heavy General Purpose Trucks?

ii. the trucks are considered Buses? iii. automobiles? iv. what if the assets involved are considered office furniture?

v. what if the assets involved are considered theme park rides (i.e. Six Flags rides and rollercoasters)?