Gen. James Mattoon Scott, USAF retired, owner of EComCon Co., comes to you in July 2016 for planning advice. EComCon is a manufacturing facility, in Norman, Oklahoma (not in a former Indian reservation in Oklahoma). It began business in 2012. This year (2016) he began an extensive ($3.6 Million) capital investment campaign. To date, he has purchased a 20,000 Honda Accord Sedan for sales (in March), and a $60,000 2 Ton delivery truck (in May). He is completing this month (July) a second building and installation of equipment. He is applying for financing to purchase a $1,000,000 machinery, and another $60,000 2 Ton delivery truck. Because of the financing process, he anticipates that these purchases will be made in late October of early November (The trucks are not subject to 280F auto limits.) The fixed asset ledger, tax basis, including the expected purchases, is shown in the attached spreadsheet. Gen Scott is concerned about the tax implications of this purchase. He wants to know the after-tax cost of these improvements. He wants to receive the maximum possible deduction this year, to lower his taxable income so that he can pay for these improvements. EComCon Co. has a 35% marginal tax rate.

Complete the schedule, and write a memo to Gen. Scott, explaining the tax effect or after-tax cash-flow of his purchases. (Consider any possible limitations on 179, the mid-quarter requirement, and auto limitations in your analysis.) Do not consider any "Bonus Depreciation" allowed.

On the 2016 sheet, the green boxes represent possible entries. E12, & E14-E16 represent cells which could (but need not) have a 179 deduction. Choose the best place to deduct the appropriate amount of 179. Note that the sales auto also affects the Section 179 computation. K7-K16 represent cells that should have depreciation calculated. I12 &I14-I16 will be either HY (Half-Year) or MQ (mid Quarter)

Section 179 amount?

Section 179 Assest Choice?

Depreciation Method?

Depreciation Computation?

After Tax Cost of Assets?

Income Tax Question