TAX 4001:Federal Income Tax I

Cost Recovery Project (Depreciation, Amortization, Section 179)

Project Details and Requirements

This project is worth 5% of your grade

THIS PROJECT IS DUE IN THE CANVAS DROPBOX BY 1:59 pm on SUNDAY 3/11.

You will be working with 2017 rules

Facts:The Tepper Company, a calendar year taxpayer, began doing business on 1/1/17.Tepper is in the business of providing data analysis services (it is NOT a manufacturer).During 2017, Tepper acquired the following assets and capitalized the following expenses:

DescriptionDate Placed in ServiceInitial Basis

Start-up Costs 1/1/17 $53,000

Office Furniture 1/1/17 75,000

Computer Hardware 2/1/17 10,000

Calculators 2/1/17 5,000

Copy Machines 2/1/17 12,000

Land 6/13/17 300,000

Building 6/13/17 450,000

Paving 10/15/17 100,000

Office Fixtures 11/1/17 80,000

On 4/1/2017, Tepper acquired the assets of Fessler, Co (one of Tepper's competitors) and allocated basis to the following assets:

DescriptionDate Placed in ServiceInitial Basis

Computer Hardware 4/1/17 490,000

Computer Software (see below) 4/1/17 685,000

Office Communications Equipment 4/1/17 30,000

Office furniture & Fixtures 4/1/17 150,000

Goodwill 4/1/17 90,000

$200,000 of the acquired computer software was off the shelf purchased by the competitor at Best Buy.The remaining $485,000 of the computer software was specially developed for Fessler's use by paid consultants.

For 2017, Tepper reported taxable income of $5 million prior to taking into account Code section 179, depreciation or amortization.

Project Requirements next page.

For 2017:Assume that Tepper will make a Code 179 election for the full amount allowed for 2017 and will make the appropriate amortization elections.

REQUIRED:

Required:Compute Tepper's 2017 cost recovery deductions related to the assets listed (showing calculations for each asset - REMEMBER BONUS DEPRECIATION WHERE APPLICABLE) for assets placed in service during 2017.Use the Chapter 7 Cost Recovery presentation materials to help you.

Required:All projects must be submitted in Excel and, where computations are required, Excel must be used to make them (i.e., do not use Excel as WORD).There should be separate tabs as follows:

• Lead - Summarizes the cost recovery deductions
• 179 Tab:Analyzes 179 and computes the 179 deduction
• Bonus Tab:Analyzes bonus depreciation and computes it
• MACRS Tab:Provides MACRS depreciation computations
• Other:Provides computation for other cost recovery (e.g., amortization and non-MACRS property)