Question
Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2022. 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 2022. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2022:
Asset | Cost | Date Placed in Service |
---|---|---|
Office furniture | $ 150,000 | 02/03/2022 |
Machinery | 1,560,000 | 07/22/2022 |
Used delivery truck*Note: | 40,000 | 08/17/2022 |
*Note:Not considered a luxury automobile.
During 2022, Karane was very successful (and had no 179 limitations) and decided to acquire more assets in 2023 to increase its production capacity. These are the assets acquired during 2023:
Asset | Cost | Date Placed in Service |
---|---|---|
Computers and information system | $ 400,000 | 03/31/2023 |
Luxury auto*Note: | 80,000 | 05/26/2023 |
Assembly equipment | 1,200,000 | 08/15/2023 |
Storage building | 700,000 | 11/13/2023 |
*Note:Used 100% for business purposes.
Karane generated taxable income in 2023 of $1,732,500 for purposes of computing the 179 expense limitation.
a. Compute the maximum 2022 depreciation deductions, including 179 expense (ignoring bonus depreciation).
b. Compute the maximum 2023 depreciation deductions, including 179 expense (ignoring bonus depreciation).
c. Compute the maximum 2023 depreciation deductions, including 179 expense, but now assume that Karane would like to take bonus depreciation.
d. Now assume that during 2023, Karane decides to buy a competitor's assets for a purchase price of $1,350,000. Compute the maximum 2023 cost recovery, including 179 expense and bonus depreciation. Karane purchased the following assets for the lump-sum purchase price:
Note: Round your final answers to the nearest whole dollar amount.
Asset | Cost | Date Placed in Service |
---|---|---|
Inventory | $ 220,000 | 09/15/2023 |
Office furniture | 230,000 | 09/15/2023 |
Machinery | 250,000 | 09/15/2023 |
Patent | 198,000 | 09/15/2023 |
Goodwill | 2,000 | 09/15/2023 |
Building | 430,000 | 09/15/2023 |
Land | 20,000 | 09/15/2023 |
Assume that Karane takes the maximum section 179 expense for the Assembly Equipment.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started