Taxation 1 2022 - Chapter 8 Assignment - Solution Part I: Elise purchased a new $2,850,000 five-year class asset on September 25, 2021. The asset was placed in service for business October 10, 2021. Assume this was the only asset purchased in 2021. Elise elected to take the maximum Section 179 expense deduction allowed but elected NOT to take additional first-year (bonus) depreciation. Elise's taxable income for 2021 before the cost recovery on this asset was $700,000. Be sure to show all of your calculations for each numbered item!! You must complete the assignment on this worksheet! 1. What is the maximum amount of $ 179 that Elise can elect in 2021? 2. What is the maximum of the Section 179 election that Elise can deduct in 2021? What happens to any Section 179 not deducted in 2021, if any? 3. What is the amount of Elise's depreciable basis (fixed, constant total we have left to depreciate after we have subtracted 179, the amount we will use each year to go to the MACRS tables)? 4. What is the amount of MACRS depreciation Elise can take in 2021? 5. What is the total depreciation deduction, including Section 179, per Form 4562 Line 22, for 2021? (See page 2 for #6 and #7 and Part II). 6. Elise sold the asset August 30, 2022 (during year 2). Selling price was $2,000,000. a. What is the amount of regular (statutory) depreciation Elise can take in 2022 (year 2)? b. What is Elise's adjusted basis after the 2022 (year 2) cost recovery? c. What is Elise's taxable gain or loss? 7. Revised scenario: Same asset acquisition date, same amount, but this time Elise asks you to compute the maximum depreciation she can take without electing Section 179 at all, i.e. how can she deduct the most depreciation without using Section 179. Hint - not MACRS! Show the calculation required to achieve the highest-possible depreciation deduction for 2021 without using Section 179. Label each calculation and describe the depreciation method used. . Show the calculation of 2022 (year 2) depreciation assuming same sale scenario given in #6. Show the calculation of adjusted basis at sale date after calculation in 7b. Show the calculation of Elise's gain or loss, again, using the same sale proceeds given in #6 on the previous page. Taxation 1 2022 - Chapter 8 Assignment - Solution Part I: Elise purchased a new $2,850,000 five-year class asset on September 25, 2021. The asset was placed in service for business October 10, 2021. Assume this was the only asset purchased in 2021. Elise elected to take the maximum Section 179 expense deduction allowed but elected NOT to take additional first-year (bonus) depreciation. Elise's taxable income for 2021 before the cost recovery on this asset was $700,000. Be sure to show all of your calculations for each numbered item!! You must complete the assignment on this worksheet! 1. What is the maximum amount of $ 179 that Elise can elect in 2021? 2. What is the maximum of the Section 179 election that Elise can deduct in 2021? What happens to any Section 179 not deducted in 2021, if any? 3. What is the amount of Elise's depreciable basis (fixed, constant total we have left to depreciate after we have subtracted 179, the amount we will use each year to go to the MACRS tables)? 4. What is the amount of MACRS depreciation Elise can take in 2021? 5. What is the total depreciation deduction, including Section 179, per Form 4562 Line 22, for 2021? (See page 2 for #6 and #7 and Part II). 6. Elise sold the asset August 30, 2022 (during year 2). Selling price was $2,000,000. a. What is the amount of regular (statutory) depreciation Elise can take in 2022 (year 2)? b. What is Elise's adjusted basis after the 2022 (year 2) cost recovery? c. What is Elise's taxable gain or loss? 7. Revised scenario: Same asset acquisition date, same amount, but this time Elise asks you to compute the maximum depreciation she can take without electing Section 179 at all, i.e. how can she deduct the most depreciation without using Section 179. Hint - not MACRS! Show the calculation required to achieve the highest-possible depreciation deduction for 2021 without using Section 179. Label each calculation and describe the depreciation method used. . Show the calculation of 2022 (year 2) depreciation assuming same sale scenario given in #6. Show the calculation of adjusted basis at sale date after calculation in 7b. Show the calculation of Elise's gain or loss, again, using the same sale proceeds given in #6 on the previous page
