Question
Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2020. 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 2020. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2020:
Asset | Cost | Date Placed in Service |
---|---|---|
Office furniture | $ 360,000 | 02/03/2020 |
Machinery | 1,602,000 | 07/22/2020 |
Used delivery truck* | 82,000 | 08/17/2020 |
*Not considered a luxury automobile.
During 2020, Karane was very successful (and had no 179 limitations) and decided to acquire more assets in 2021 to increase its production capacity. These are the assets acquired during 2021:
Asset | Cost | Date Placed in Service |
---|---|---|
Computers and information system | $ 442,000 | 03/31/2021 |
Luxury auto | 90,500 | 05/26/2021 |
Assembly equipment | 1,410,000 | 08/15/2021 |
Storage building | 700,000 | 11/13/2021 |
Used 100% for business purposes.
Karane generated taxable income in 2021 of $1,785,000 for purposes of computing the 179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) (Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers.)
a. Compute the maximum 2020 depreciation deductions, including 179 expense (ignoring bonus depreciation).
b. Compute the maximum 2021 depreciation deductions, including 179 expense (ignoring bonus depreciation).
c. Compute the maximum 2021 depreciation deductions, including 179 expense, but now assume that Karane would like to take bonus depreciation.
d. Now assume that during 2021, Karane decides to buy a competitors assets for a purchase price of $1,601,580. Compute the maximum 2021 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 | $ 262,000 | 09/15/2021 |
Office furniture | 272,000 | 09/15/2021 |
Machinery | 292,000 | 09/15/2021 |
Patent | 235,800 | 09/15/2021 |
Goodwill | 5,780 | 09/15/2021 |
Building | 472,000 | 09/15/2021 |
Land | 62,000 | 09/15/2021 |
Assume that Karane takes the maximum section 179 expense for the Assembly Equipment.
e. Complete Karane Enterprises's Form 4562 for part (b).
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