Facts: The Tepper Company, a calendar year taxpayer, began doing business on 1/1/Year 1. Tepper is in the business of providing data analysis services (it is NOT a manufacturer). During Year 1. Tepper acquired the following assets and capitalized the following expenses: Description Start-up Costs Office Furniture Computer Hardware Calculators Copy Machines Land Building Paving Office Fixtures Date Placed in Service 1/1/Year 1 1/1/Year 1 2/1/Year 1 2/1/Year 1 2/1/Year 1 6/13/Year 1 6/13/Year 1 10/15/Year 1 11/1/Year 1 Initial Basis $53,000 175,000 110,000 5,000 12,000 300,000 450,000 100,000 80,000 On 4/1/Year 1, Tepper acquired the assets of Fessler, Co (one of Tepper's competitors) and allocated basis to the following assets: Description Date Placed in Service Initial Basis Computer Hardware 4/1/Year 1 490,000 Computer Software (see below) 4/1/Year 1 685,000 Office Communications Equipment 4/1/Year 1 30,000 Office furniture & Fixtures 4/1/Year 1 150,000 Goodwill 4/1/Year 1 90,000 $200,000 of the acquired computer software was off the shelf purchased by the competitor at Best Buy The remaining S485,000 of the computer software was specially developed for Fessler's use by paid consultants. For Year 1, Tepper reported taxable income of $3 million prior to considering Code section 179, depreciation or amortization. For Year 1: Assume that Tepper will make whatever decisions/elections that will yield it the most cost recovery deductions Compute Tepper's Year 1 cost recovery deductions related to the assets listed (showing calculations for each asset) for assets placed in service during Year 1. Use the PowerPoints I've provided that walk you through the process to help you. Assume that: 1) Bonus depreciation percentage is 50%, and 2) The maximum 179 deduction is $1 million and the 179 deduction amount phases out between $2.5 and $3.5 million of eligible property. Excel File Requirements: All projects must be submitted in Excel and, where computations are required, Excel must be used to make them (i.e., do not use Excel as WORD). There should be separate tabs as follows: Category tab (shows the assets and indicates what category they are in- e.g., 179, Bonus, MACRS (3, 5, 7, 10, 15, 20, 27.5, 39), 195 (startup), 248 (org. expenditures), 197 (off the shelf software amortization), 167 (amortization) or other - note that an asset can be in more than one category. Lead - Summarizes the 179/depreciation/amortization deductions for each asset. The computations from the tabs after it should come from those tabs. 179 Tab: Analyzes 179 and computes the 179 deduction (if applicable) Bonus Tab: Analyzes bonus depreciation and computes it MACRS Tab: Analyzes the MACRS conventions used and provides MACRS depreciation computations Other: Provides computation for other cost recovery (eg., amortization and non-MACRS property)
