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13 August, 15:37

McKenzie purchased qualifying equipment for his business that cost $309,500 in 2019. The taxable income of the business for the year is $40,100 before consideration of any § 179 deduction. Calculate McKenzie's § 179 expense deduction for 2019 and any carryover to 2020.

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  1. 13 August, 16:06
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    The correct answer is $40,100 and $269,400.

    Explanation:

    According to the scenario, the given data are as follows:

    Cost of equipment = $309,500

    Taxable income = $40,100

    So, As per section 179 we know that full taxable amount is allowed as deduction.

    So, Expense deduction for 2019 = Full taxable amount of 2019

    Expense deduction for 2019 (acc. section 179) = $40,100

    And carryover balance to 2020 = Cost of equipment - Expense deduction for 2019

    Carryover balance to 2020 = $309,500 - $40,100

    = $269,400

    Hence, the expense deduction for 2019 is $40,100 and carryover balance to 2020 is $269,40.
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