You are the resident tax expert forWetzel’s Pretzels, an international producer of junk food. The controller has come to you with the company’s capital expenditures budget for next year. The budget shows that Wetzel’s Pretzels plans to spend $1,000,000 next year on personal property. The largest single item in the budget is the purchase of new, high-tech pretzel twisters costing $450,000. The pretzel twisters are on order, but because of high demand for the technology, Wetzel’s Pretzels will not receive the new twisters until November. The remaining $550,000 is for company automobiles, delivery trucks, personal computers, and office furniture. These items will be purchased throughout the year as needed.

The controller asks your advice on the tax aspects of these purchases. She is particularly interested in making sure that Wetzel’s Pretzels can deduct the maximum amount regarding these purchases in the year of purchase.

How would you advise the controller? That is, are there any tax problems associated with these purchases? If so, suggest one or more ways in which Wetzel’s can take advantage of the situation. Write a memorandum to the controller explaining your suggestions.