Question

Tan Company acquires a new machine (10-year property) on January 15, 2019, at a cost of $200,000. Tan also acquires another new machine (7-year property) on November 5, 2019, at a cost of $40,000. No election is made to use the straight-line method. The company does not make the § 179 election and elects to not take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2019.

Answer 1

$132,858

Step-by-step explanation:

New machine (ten-year property) on January 15, 2019:

Additional first-year depreciation = 200,000 × 50% half year convention

= $100,000

MACR depreciation = $100,000 × 10%

= $10,000

New machine (ten-year property) on January 15, 2019:

= Additional first-year depreciation + MACR depreciation

= $100,000 + $10,000

= $110,000

Another new machine (seven-year property) on November 5, 2019:

Additional first-year depreciation = $40,000 × 50% half year convention

= $20,000

MACR depreciation = [$20,000 × 14.29%]

= $2,858

New machine (ten-year property) on November 5, 2019:

= Additional first-year depreciation + MACR depreciation

= $20,000 + $2,858

= $22,858

Total deductions:

= New machine (ten-year property) on January 15, 2019 + New machine (ten-year property) on November 5, 2019

= $110,000 + $22,858

= $132,858