Question
Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2018. In the process of setting up the business, Karane has acquired
Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2018. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2018:
Asset | Cost | Date Placed in Service | |
Office furniture | $ | 150,000 | 02/03/2018 |
Machinery | 1,560,000 | 07/22/2018 | |
Used delivery truck* | 40,000 | 08/17/2018 | |
|
*Not considered a luxury automobile.
During 2018, Karane was very successful (and had no 179 limitations) and decided to acquire more assets in 2019 to increase its production capacity. These are the assets acquired during 2019:
Asset | Cost | Date Placed in Service | |
Computers & info. system | $ | 400,000 | 03/31/2019 |
Luxury auto | 80,000 | 05/26/2019 | |
Assembly equipment | 1,200,000 | 08/15/2019 | |
Storage building | 700,000 | 11/13/2019 | |
|
Used 100% for business purposes.
Karane generated taxable income in 2019 of $1,732,500 for purposes of computing the 179 expense. (Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers.)
d. Now assume that during 2019, Karane decides to buy a competitors assets for a purchase price of $1,350,000. Compute the maximum 2019 cost recovery, including 179 expense and bonus depreciation. Karane purchased the following assets for the lump-sum purchase price. (Round your final answers to the nearest whole dollar amount.)
Asset | Cost | Date Placed in Service | |
Inventory | $ | 220,000 | 09/15/2019 |
Office furniture | 230,000 | 09/15/2019 | |
Machinery | 250,000 | 09/15/2019 | |
Patent | 198,000 | 09/15/2019 | |
Goodwill | 2,000 | 09/15/2019 | |
Building | 430,000 | 09/15/2019 | |
Land | 20,000 | 09/15/2019 | |
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e. Complete Karane Enterprises's Part I of Form 4562 for part (b) (use the most current form available).
TULLIT Description Cost Sec. 179 Expense Bonus MACRS Basis MACRS Depreciation Depreciation Deduction $ $ $ $ $ 2018 Assets Office furniture Machinery Used delivery truck 150,000 1,560,000 40,000 0 0 0 0 0 0 150,000 560,000 40,000 36,735 137,144 12,800 36,735 137,144 12,800 0 400,000 0 400,000 2019 Assets Computers & Info System Luxury Auto Assembly Equipment Storage Building 10,000 400,000 80,000 1,200,000 700,000 0 1,020,000 0 8,000 180,000 0 72,000 0 700,000 0 18,000 1,200,000 2,247 2,247 0 0 Inventory Office Furniture Machinery Patent Goodwill Building Land 220,000 230,000 250,000 198,000 2,000 430,000 20,000 0 230,000 250,000 0 0 0 0 0 198,000 2,000 430,000 0 0 0 0 0 0 4,400 44 3,221 230,000 250,000 4,400 44 3,221 0 Totals $ 5,480,000 $ 1,020,000 $ 1,068,000 $ 2,152,000 $ 206,591 $ 2,294,591 TULLIT Description Cost Sec. 179 Expense Bonus MACRS Basis MACRS Depreciation Depreciation Deduction $ $ $ $ $ 2018 Assets Office furniture Machinery Used delivery truck 150,000 1,560,000 40,000 0 0 0 0 0 0 150,000 560,000 40,000 36,735 137,144 12,800 36,735 137,144 12,800 0 400,000 0 400,000 2019 Assets Computers & Info System Luxury Auto Assembly Equipment Storage Building 10,000 400,000 80,000 1,200,000 700,000 0 1,020,000 0 8,000 180,000 0 72,000 0 700,000 0 18,000 1,200,000 2,247 2,247 0 0 Inventory Office Furniture Machinery Patent Goodwill Building Land 220,000 230,000 250,000 198,000 2,000 430,000 20,000 0 230,000 250,000 0 0 0 0 0 198,000 2,000 430,000 0 0 0 0 0 0 4,400 44 3,221 230,000 250,000 4,400 44 3,221 0 Totals $ 5,480,000 $ 1,020,000 $ 1,068,000 $ 2,152,000 $ 206,591 $ 2,294,591Step by Step Solution
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