depletion (if IDCs are capitalized) $ 30,000 a. What is the percentage depletion amount if the IDCs are expensed? b. What is the percentage depletion amount if the IDCs are capitalized? c. What is the depletion deduction amount assuming that the IDCs are expensed? d. Based on the information above, which method should be used for the IDCs? Explain. 1:10-47 COMPREHENSIVE PROBLEM John and Ellen Brite are married, file a joint return, and are less than 65 years old. They have no dependents and claim the standard deduction. John owns an unincorporated specialty elec- trical lighting retail store, Brite-On. Brite-On had the following assets on January 1, 2019: Assets Cost Old store building purchased April 1, 2004 $100,000 Equipment (7-year recovery) purchased January 10, 2014 30,000 Inventory valued using FIFO method: 4,000 light bulbs $5/bulb Brite-On purchased a competitor's store on March 1, 2019, for $206,000. The purchase price included the following: New store building $115,000 (FMV) Land 28,000 (FMV) Equipment (5-year recovery) 45,000 (FMV) Inventory: 3,000 light bulbs $6/bulb (cost) On June 30, 2019, Brite-On sold the 7-year recovery period equipment for $12,000. Brite-On leased a car for $860/month beginning on June 1, 2019. The car is used 100% for business and was driven 14,000 miles during the year. Brite-On sold 8,000 light bulbs at a price of $15/bulb during the year. Also, Brite-On made additional purchases of 4,000 light bulbs in August 2019 at a cost of $7/bulb. Brite-On had the following revenues (in addition to the sales of light bulbs) and additional expenses: Service revenues $94,000 Interest expense on business loans 6,000 Auto expenses (gas, oil, etc.) Taxes and licenses 3,300 Utilities 2,800 Salaries 36,000 Ellen receives $42,000 of wages from employment elsewhere, from which $4,000 of fed- eral income taxes were withheld. John and Ellen made four $3,100 quarterly estimated tax payments. For self-employment tax purposes, assumie John spent 100% of his time a the store while Ellen spends no time at the store. 4,800 any payments that would require it to file Form 1099. Las ielaod, Thom materially participates in it, and it did not make Complete Thom's 2019 Form 4562 and Schedule C of Form 1040, assuming he elects to expense the maximum amount possible under Sec. 179 and uses bonus depreciation for any eligible amounts exceeding the Sec. 179 maximum. 1:10-51 Refer to the facts in Problem 1:10-47 for John and Ellen Brite. The following information is also available for them: John and Ellen live at 111 Maple Street, Johnsonville, Colorado 81733. - Brite-On is located at 3900 Market Street, Johnsonville, Colorado 81733. Its employer identification number is 44-1357924. The business uses the accrual method and did not make any payments that would require Form 1099 to be filed. It has used the cost method to value inventory for many years. John started using his automobile in his business on July 1, 2012. During 2019, it was used 7,000 miles for John's business, 1,800 miles for commuting, and 6,500 miles for other reasons. The automobile and Ellen's automobile were available for personal use and during off-duty hours. John has written evidence to support his deduction for automobile expenses. Complete the Brites 2019 Form 1040, Schedules 1, 2, 3, C, and SE, and Forms 4562 and 4797. CASE STUDY PROBLEMS 1:10-52 Able Corporation is a manufacturer of electrical lighting fixtures. Able is currently nego- tiating with Ralph Johnson, the owner of an unincorporated business, to acquire his retail electrical lighting sales business. Johnson's assets include the following: Assets Adjusted Basis RMY depletion (if IDCs are capitalized) $ 30,000 a. What is the percentage depletion amount if the IDCs are expensed? b. What is the percentage depletion amount if the IDCs are capitalized? c. What is the depletion deduction amount assuming that the IDCs are expensed? d. Based on the information above, which method should be used for the IDCs? Explain. 1:10-47 COMPREHENSIVE PROBLEM John and Ellen Brite are married, file a joint return, and are less than 65 years old. They have no dependents and claim the standard deduction. John owns an unincorporated specialty elec- trical lighting retail store, Brite-On. Brite-On had the following assets on January 1, 2019: Assets Cost Old store building purchased April 1, 2004 $100,000 Equipment (7-year recovery) purchased January 10, 2014 30,000 Inventory valued using FIFO method: 4,000 light bulbs $5/bulb Brite-On purchased a competitor's store on March 1, 2019, for $206,000. The purchase price included the following: New store building $115,000 (FMV) Land 28,000 (FMV) Equipment (5-year recovery) 45,000 (FMV) Inventory: 3,000 light bulbs $6/bulb (cost) On June 30, 2019, Brite-On sold the 7-year recovery period equipment for $12,000. Brite-On leased a car for $860/month beginning on June 1, 2019. The car is used 100% for business and was driven 14,000 miles during the year. Brite-On sold 8,000 light bulbs at a price of $15/bulb during the year. Also, Brite-On made additional purchases of 4,000 light bulbs in August 2019 at a cost of $7/bulb. Brite-On had the following revenues (in addition to the sales of light bulbs) and additional expenses: Service revenues $94,000 Interest expense on business loans 6,000 Auto expenses (gas, oil, etc.) Taxes and licenses 3,300 Utilities 2,800 Salaries 36,000 Ellen receives $42,000 of wages from employment elsewhere, from which $4,000 of fed- eral income taxes were withheld. John and Ellen made four $3,100 quarterly estimated tax payments. For self-employment tax purposes, assumie John spent 100% of his time a the store while Ellen spends no time at the store. 4,800 any payments that would require it to file Form 1099. Las ielaod, Thom materially participates in it, and it did not make Complete Thom's 2019 Form 4562 and Schedule C of Form 1040, assuming he elects to expense the maximum amount possible under Sec. 179 and uses bonus depreciation for any eligible amounts exceeding the Sec. 179 maximum. 1:10-51 Refer to the facts in Problem 1:10-47 for John and Ellen Brite. The following information is also available for them: John and Ellen live at 111 Maple Street, Johnsonville, Colorado 81733. - Brite-On is located at 3900 Market Street, Johnsonville, Colorado 81733. Its employer identification number is 44-1357924. The business uses the accrual method and did not make any payments that would require Form 1099 to be filed. It has used the cost method to value inventory for many years. John started using his automobile in his business on July 1, 2012. During 2019, it was used 7,000 miles for John's business, 1,800 miles for commuting, and 6,500 miles for other reasons. The automobile and Ellen's automobile were available for personal use and during off-duty hours. John has written evidence to support his deduction for automobile expenses. Complete the Brites 2019 Form 1040, Schedules 1, 2, 3, C, and SE, and Forms 4562 and 4797. CASE STUDY PROBLEMS 1:10-52 Able Corporation is a manufacturer of electrical lighting fixtures. Able is currently nego- tiating with Ralph Johnson, the owner of an unincorporated business, to acquire his retail electrical lighting sales business. Johnson's assets include the following: Assets Adjusted Basis RMY