In 2016, Firm L purchased machinery costing $21,300 and elected to expense the entire cost under Section 179. How much of the expense can Firm L deduct in each of the following cases? a. Its taxable income before the deduction was $58,000. b. Its taxable income before the deduction was $19,200. c. Its net operating loss (NOL) before the deduction was $5,016.

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23 July, 21:07

In 2016, Firm L purchased machinery costing $21,300 and elected to expense the entire cost under Section 179. How much of the expense can Firm L deduct in each of the following cases? a. Its taxable income before the deduction was $58,000. b. Its taxable income before the deduction was $19,200. c. Its net operating loss (NOL) before the deduction was $5,016.

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Quinton Berry · Answer 1

Section 179 allows claiming full deduction of purchase price.

The maximum limit deduction:

year 2010 and beyond = 500,000

a. The amount deductable is limited to the taxable income.

The taxable income = $58,000, it is more than cost of machinery which is $21,300. In this case, full cost of machinery can be deducted.

So deduction under section 179 is $21,300

b. Taxable income = $19,200, it is less that cost of machinery. Therefore, only partial deduction is allowed under section 179, which is $19,200