ercentage 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. COMPREHENSIVE PROBLEM John and Ellen Brite (SSN 000-00-1111 and 000-00-2222, respectively) are married and 10-48 a joint return. They have no dependents. John owns an unincorporated specialty elec trical li ing retail store, Brite-On. Brite-On had the following assets on January 1, 2017: Assets Cost Old store building purchased April 1, 2002 Equipment (7-year recovery) purchased January 10, 2012 Inventory valued using FIFO method: 4,000 light bulbs $100,000 30,000 $5/bulb Brite-On purchased a competitor's store on March 1, 2017, for $107,000. The purchase price included the following: New store building Land Equipment (5-year recovery) Inventory: 3,000 light bulbs $60,000 (FMV) 18,000 (FMV) 11,000 (FMV) $ 6/bulb (cost) On June 30, 2017, Brite-On sold the 7-year recovery period equipment for $12,000. Brite-On leased a car for $500/month beginning on January 1, 2017. The car is used 100% for business and was driven 14,000 miles duringthe 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 2017 at a cost of $7/bulb. Brite-On had the following revenues (in addition to the sales of light bulbs) and additional expenses: $64,000 Service revenues Interest expense on business loans Auto expenses (gas, oil, etc.) Taxes and licenses Utilities Salaries 4,000 3,800 3,300 2,800 24,000 John and Ellen also had some personal expenses: Medical bills Real property taxes State income taxes Home mortgage interest Charitable contributions (cash) $4,500 3,800 4,000 5,000 600 The Brites received interest income on a bank savings account of $275, lohn made four $5,000 quarterly estimated tax payments. For self-employment len assume John spent 100% of his time at the sto s, Additional Facts: tax pu re while Ellen spends no time at the store. Equipment acquired in 2012: The Brites elected out of bonus depreciation and did not elect Sec. 179 . Chapter 10 Equipment acquired in 2017: The Brites elected Sec. 179 to expense the cost of the 5-year equipment Assume that the lease inclusion rules require that Brite-On reduce its deductible lease expense by $8. Compute the Brite's taxable income and balance due or refund for 2017 ercentage 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. COMPREHENSIVE PROBLEM John and Ellen Brite (SSN 000-00-1111 and 000-00-2222, respectively) are married and 10-48 a joint return. They have no dependents. John owns an unincorporated specialty elec trical li ing retail store, Brite-On. Brite-On had the following assets on January 1, 2017: Assets Cost Old store building purchased April 1, 2002 Equipment (7-year recovery) purchased January 10, 2012 Inventory valued using FIFO method: 4,000 light bulbs $100,000 30,000 $5/bulb Brite-On purchased a competitor's store on March 1, 2017, for $107,000. The purchase price included the following: New store building Land Equipment (5-year recovery) Inventory: 3,000 light bulbs $60,000 (FMV) 18,000 (FMV) 11,000 (FMV) $ 6/bulb (cost) On June 30, 2017, Brite-On sold the 7-year recovery period equipment for $12,000. Brite-On leased a car for $500/month beginning on January 1, 2017. The car is used 100% for business and was driven 14,000 miles duringthe 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 2017 at a cost of $7/bulb. Brite-On had the following revenues (in addition to the sales of light bulbs) and additional expenses: $64,000 Service revenues Interest expense on business loans Auto expenses (gas, oil, etc.) Taxes and licenses Utilities Salaries 4,000 3,800 3,300 2,800 24,000 John and Ellen also had some personal expenses: Medical bills Real property taxes State income taxes Home mortgage interest Charitable contributions (cash) $4,500 3,800 4,000 5,000 600 The Brites received interest income on a bank savings account of $275, lohn made four $5,000 quarterly estimated tax payments. For self-employment len assume John spent 100% of his time at the sto s, Additional Facts: tax pu re while Ellen spends no time at the store. Equipment acquired in 2012: The Brites elected out of bonus depreciation and did not elect Sec. 179 . Chapter 10 Equipment acquired in 2017: The Brites elected Sec. 179 to expense the cost of the 5-year equipment Assume that the lease inclusion rules require that Brite-On reduce its deductible lease expense by $8. Compute the Brite's taxable income and balance due or refund for 2017