Required Information [The following information applies to the questions displayed below.) Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2021. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2021: Cont Date Placed in Service Annet office furniture Machinery Used delivery truck* $ 150,000 1,560,000 40,000 02/03/2021 07/22/2021 08/17/2021 "Not considered a luxury automobile. During 2021, Karane was very successful (and had no 5179 limitations) and decided to acquire more assets in 2022 to increase its production capacity. These are the assets acquired during 2022: Date Placed in Asset Computers and information system Luxury auto* Assembly equipment Cost Service $ 400,000 03/31/2022 80,000 1,200,000 700,000 05/26/2022 08/15/2022 11/13/2022 Storage building "Used 100% for business purposes. Karane generated taxable income in 2022 of $1,732,500 for purposes of computing the $179 expense limitation. (Use MACRS Table 1. Table 2. Table 3. Table 4, Table 5., and Exhibit 10-10.) Note: Leave no answer blank. Enter zero If applicable. Input all the values as positive numbers. Required: AARI 9 Prev 1 2 3 5 of 5 Next > "Used 100% for business purposes. Karane generated taxable income in 2022 of $1,732,500 for purposes of computing the $179 expense limitation. (Use MACRS Table 1. Table 2. Table 3, Table 4, Table 5, and Exhibit 10-10.) Note: Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers. Required: a. Compute the maximum 2021 depreciation deductions, including $179 expense (ignoring bonus depreciation). Description Cost 5179 Expense MACRS Basis Current MACRS Total Cost Recovery Depreciation Deduction Office furniture Machinery $ 150,000 $ 1,560,000 0 $ 150,000 $ 21,435 $ 21,435 0 Used delivery truck 40,000 40,000 8,000 8,000 Total $ 1,750,000 $ 0 $ 190,000 $ 29,435 $ 29,435 Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2021. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2021: Date Placed in Service Asset Office furniture Machinery Used delivery truck* Cost $ 150,000 1,560,000 40,000 02/03/2021 07/22/2021 08/17/2021 *Not considered a luxury automobile. During 2021, Karane was very successful (and had no 179 limitations) and decided to acquire more assets in 2022 to Increase its production capacity. These are the assets acquired during 2022: Asset Computers and information system Luxury auto Assembly equipment Storage building Cost $ 400,000 Date Placed in Service 03/31/2022 05/26/2022 80,000 1,200,000 700,000 08/15/2022 11/13/2022 *Used 100% for business purposes. Karane generated taxable income in 2022 of $1,732,500 for purposes of computing the $179 expense limitation. (Use MACRS Table 1. Table 2. Table 3. Table 4. Table 5, and Exhibit 10-10.) Note: Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers. "Used 100% for business purposes. Karane generated taxable income in 2022 of $1,732,500 for purposes of computing the $179 expense limitation. (Use MACRS Table 1. Table 2. Table 3, Table 4. Table 5, and Exhibit 10-10.) Note: Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers. Required: b. Compute the maximum 2022 depreciation deductions, including 5179 expense (ignoring bonus depreciation). Description 2021 Assets Office furniture Machinery Used delivery truck 2022 Assets Computers and Information System Luxury Auto Storage Building Assembly Equipment Total Cost Section 179 Expense MACRS Basis Current MACRS Depreciation Total Cost Recovery Deduction $ 150,000 $ 0 $ 150,000 $ 36,735 $ 36,735 1,560,000 0 0 0 12,800 12,800 0 0 0 0 1,710,000 $ 0 $ 150,000 $ 49,535 $ 49,535 Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2021. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2021: Date Placed in Asset office furniture Machinery Used delivery truck* Cost $ 150,000 1,560,000 40,000 Service 02/03/2021 07/22/2021 08/17/2021 "Not considered a luxury automobile. During 2021, Karane was very successful (and had no 179 limitations) and decided to acquire more assets in 2022 to increase its production capacity. These are the assets acquired during 2022: Asset Cost Computers and information system. $ 400,000 Date Placed in Service Luxury auto* Assembly equipment Storage building *Used 100% for business purposes. 03/31/2022 80,000 1,200,000 700,000 05/26/2022 08/15/2022 11/13/2022 Karane generated taxable income in 2022 of $1,732,500 for purposes of computing the $179 expense limitation. (Use MACRS Table 1. Table 2. Table 3, Table 4. Table 5, and Exhibit 10-10.) Note: Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers. Required: c. Compute the maximum 2022 depreciation deductions, including $179 expense, but now assume that Karane would like to take bonus depreciation. Description 2021 Assets Office Furniture Machinery Used Delivery Truck 2022 Assets Computers and Information System Luxury Auto Assembly Equipment Storage Building Total Cost Section 179 Expense Bonus MACRS Basis Current MACRS Depreciation Total Cost Recovery Deduction $ 0 0 0 O 0 0 $ 0 $ 0 $ $ 0 $ 0 d. Now assume that during 2022, Karane decides to buy a competitor's assets for a purchase price of $1,350,000. Compute the maximum 2022 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. Date Placed in Service 09/15/2022 Annet Cont Inventory $220,000 office furniture 230,000 09/15/2022 Machinery 250,000 09/15/2022 Patent 198,000 09/15/2022 Goodwill Building 2,000 09/15/2022 430,000 09/15/2022 Land 20,000 09/15/2022 Assume that Karane takes the maximum section 179 expense for the Assembly Equipment. Description Cont Section 170 Expense Bonus MACRS Basis Current MACRS Depreciation Total Cost Current Amortization Recovery Deduction 2021 Assets Office Furniture Machinery Used Delivery Truck 2022 Assets Computers and Information System Luxury Auto Assembly Equipment Storage Building Inventory Office Fumiture Machinery Patent Goodwill Building Land Totals 0 0 0 0 0 0 0 0 0 0 0 0 0 $ 0 $ 0 $ 0 $ 0 $ 0 Table 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year Year 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750% Year 2 44.45 32.00 24.49 18.00 9.50 7.219 Year 3 14.81 19.20 17.49 14.40 8.55 6.677 Year 4 7.41 11.52 12.49 11.52 7.70 6.177 Year 5 11.52 8.93 9.22 6.93 5.713 Year 6 5.76 8.92 7.37 6.23 5.285 Year 7 8.93 6.55 5.90 4.888 Year 8 4.46 6.55 5.90 4.522 Year 9 6.56 5.91 4.462 Year 10 6.55 5.90 4.461 Year 11 3.28 5.91 4.462 Year 12 5.90 4.461 Year 13 5.91 4.462 Year 14 5.90 4.461 Year 15 5.91 4.462 Year 16 2.95 4.461 Year 17 4.462 Year 18 4.461 Year 19 4.462 Year 20 4.461 Year 21 2.231 TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 35.00% 25.00% Year 2 26.00 21.43 Year 3 15.60 15.31 Year 4 11.01 10.93 Year 5 11.01 8.75 Year 6 1.38 8.74 Year 7 8.75 Year 8 1.09. TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 25.00% 17.85% Year 2 30.00 23.47 Year 3 18.00 16.76 Year 4 11.37 11.97 Year 5 11.37 8.87 Year 6 4.26 8.87 Year 7 8.87 3.34 Year 8 TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 15.00% 10.71% Year 2 34.00 25.51 Year 3 20.40 18.22 Year 4 12.24 13.02 Year 5 11.30 9.30 TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 15.00% 10.71% Year 2 34.00 25.51 Year 3 20.40 18.22 Year 4 12.24 13.02 Year 5 11.30 9.30 Year 6 7.06 8.85 Year 7 8.86 5.53 Year 8 TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter Depreciation Rate for Recovery Period 5-Year 7-Year Year 1 5.00% 3.57% Year 2 38.00 27.55 Year 3 22.80 19.68 Year 4. 13.68 14.06 Year 5 10.94 10.04 Year 6 9.58 8.73 Year 7 8.73 Year 8 7.64 TABLE 3 Residential Rental Property Mid-Month Convention Straight Line-27.5 Years Month Property Placed in Service Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 1 3.485% 3.182% 2.879% 2.576% 2.273% 1.970% 1.667% 1.364% 1.061% 0.758% 0.455% 0.152% Year 2-9 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 3.636 Year 10 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 11 3.636 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 3.637 Year 12 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 13 3.636 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 3.637 Year 14. 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 15 3.636 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 3.637 Year 16 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 17 3.636 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 3.637 Year 18 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 19 3.636 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 3.637 Year 20 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 21 3.636 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 3.637 Year 22 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 23 3.636 3.636 3.636 3.636 3.636 3.636) 3.637 3.637 3.637 3.637 3.637 3.637 Year 24 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 25 3.636 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 3.637 Year 26 3.637 3.637 3.637 3.637 3.637 3.637 3.636 3.636 3.636 3.636 3.636 3.636 Year 27 3.636 3.636 3.636 3.636 3.636 3.636 3.637 3.637 3.637 3.637 3.637 3.637 Year 28 1.97 2.273 2.576 2.879 3.182 3.485 3.636 3.636 3.636 3,636 3.636 3.636 Year 29 0.152 0.455 0.758 1.061 1.364 1.667 TABLE 4 Nonresidential Real Property Mid-Month Convention Straight Line-31.5 Years (for assets placed in service before May 13, 1993) Month Property Placed in Service Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Year 1 Year 2-7 3042% 2.778% 2.513 2.249% 1984% 1.720% 1455% 1.190 % 0.926% 0.661% 0.397% 0.132% 3.175 3.375 3.175 3.175 3.175 3.175 3.175 3.175 3.175 3.175 3.175 3.175 Year 8 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.175 3.175 3.175 3.175 3.175 Year 9 3.174 3.175 3.174 3.175 3.174 3.175 3.374 3.175 3.174 3.175 3.174 3.375 Year 10 3.175 3.174 3.175 3.174 3.175 3.174 3.375 3374 3.175 3.174 3.175 3.174 Year 11 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3375 Year 12 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.375 3.174 Year 13 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.375 3.174 3.375 Year 14 3,175 3,174 3.175 3.174 3.175 3.174 3.175 3.374 3.175 3.174 3.175 3174 Year 15 3.174 3.195 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 Year 16 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3,174 Year 17 3174 3.375 3.174 3.175 3.174 3.175 3.174 3.175 31741 3.175 3.174 3.175 Year 18 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.374 Year 19 3174 3.175 3.174 3.175 3.174 3.175 3,174 3.175 3.174 3.175 3.174 3175 Year 20 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.374 Year 21 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 Year 22 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 Year 23 3.174 3175 3.174 3.175 3.174 3.175 = 3.174 L 3.115 + 3.175 3,174 3.175 3174 3.174 3.175 3.174 3.375 4 Year 20 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 Year 21 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 Year 22 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 Year 23 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.115 3.174 3.175 3.174 3.175 Year 24 3.175 3.174 3.175 3.174 3.175 3.174) 3.175 3.174 3.175 3.174 3.175 3.174 Year 25 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 Year 26 3.175 3.174 3.175 3,174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 Year 27 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 Year 28 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 Year 29 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 Year 30 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 Year 31 3:174 3:175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.175 3.174 3.375 Year 32 1,720 1984 2.249 2.513 2.778 3.042 3.175 3,174 3.175 3.174 3.175 3.174 Year 33 0.132 0.397 0.661 0.926 1.190 1455 TABLE 5 Nonresidential Real Property Mid-Month Convention Straight Line-39 Years (for assets placed in service on or ther May 15, 1975) Month Property Placed in Service Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 101 Month 11 Month 12 Year 1 2.461% 2247% 2033% 1.819% 1.605% 1.391% 1.177 % 0.963% 0.749% 0.535% 0321% 0.107% Year 2-39 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.564 2.364 2.564 2564 2564 Year 401 0.107 0.321 0535 0.749 0.963 1.177 1391 1.605 1819 2.033 2247 2.461 Recovery EXHIBIT 10-10 Automobile Depreciation Limits Year Placed In Service Year 2022* 2021 2020 2019 1 10,200** 10,200** 10,100** 10,100 2 3 16,400 16,400 16,100 16,100 9,800 9,800 9,700 9,700 4 and after 5,860 5,860 5,760 5,760 "As of press date, the IRS had not released the 2022 limitations for automobiles, so throughout the chapter we use the same limitations as in 2021 for 2022. **$8,000 additional depreciation is allowed when bonus depreciation is claimed [$168(kX2X(F)]