Principles of Taxation for Business and Investment Planning 2020 Edition
23rd Edition
ISBN: 9781260433210
Author: Jones, Sally
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Textbook Question
Chapter 7, Problem 23AP
In 2019, 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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In 2022, Firm L purchased machinery costing $21,300 and elected to expense the entire cost under Section 179.
Required:
a. How much of the expense can Firm L deduct if its taxable income before the deduction was $58,000.
b. How much of the expense can Firm L deduct if its taxable income before the deduction was $19,200.
c. How much of the expense can Firm L deduct if its net operating loss (NOL) before the deduction was $5,016.
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C
How much of the expense can Firm L deduct if its taxable income before the deduction was $58,000.
Deduction
Ayres Services acquired an asset for $200 million in 2021. The asset is depreciated for financial reporting purposes
over four years on a straight-line basis (no residual value). For tax purposes the asset's cost is depreciated by MACRS.
The enacted tax rate is 25%. Amounts for pretax accounting income, depreciation, and taxable income in 2021, 2022,
2023, and 2024 are as follows:
2021
$405 $425
($ in millions)
2022 2023 2024
$440
Pretax accounting income
Depreciation on the income
statement
Depreciation on the tax
return
$475
50
50
50
50
(64)
(84)
(30)
(22)
Taxable income
$391 $391
$460
$503
Required:
For December 31 of each year, determine (a) the cumulative temporary book-tax difference for the depreciable asset
and (b) the balance to be reported in the deferred tax liability account. (Leave no cell blank, enter "O" wherever
applicable. Enter your answers in millions rounded to 2 decimal place (i.e., 5,500,000 should be entered as 5.50).)
Beginning of End of
2021
End of
End of
End…
AMP Corporation (calendar-year-end) has 2019 taxable income of $1,900,000 for purposes of computing the §179 expense. During 2019, AMP acquired the following assets:
Â
Â
Placed in
Â
Â
Asset
Service
Â
Basis
Machinery
September 12
$
1,470,000
Computer equipment
February 10
Â
455,000
Office building
April 2
Â
570,000
Total
Â
$
2,495,000
Â
Â
a. What is the maximum amount of §179 expense AMP may deduct for 2019?
 B. What is the maximum total depreciation, including §179 expense, that AMP may deduct in 2019 on the assets it placed in service in 2019, assuming no bonus depreciation?
Chapter 7 Solutions
Principles of Taxation for Business and Investment Planning 2020 Edition
Ch. 7 - Prob. 1QPDCh. 7 - Assume that Congress enacted legislation requiring...Ch. 7 - Prob. 3QPDCh. 7 - To what extent do cost recovery deductions based...Ch. 7 - Can a firm have a negative tax basis in an asset?Ch. 7 - Prob. 6QPDCh. 7 - Corporation J manufactures electrical appliances....Ch. 7 - Identify the tax and nontax issues that firms must...Ch. 7 - Identify four possible differences in the...Ch. 7 - Prob. 10QPD
Ch. 7 - Prob. 11QPDCh. 7 - Prob. 12QPDCh. 7 - Prob. 13QPDCh. 7 - Prob. 14QPDCh. 7 - Prob. 15QPDCh. 7 - Prob. 16QPDCh. 7 - Prob. 17QPDCh. 7 - Prob. 18QPDCh. 7 - Prob. 1APCh. 7 - Assuming a 21 percent tax rate, compute the...Ch. 7 - Determine the tax basis of the business asset...Ch. 7 - ABC Company purchased business property several...Ch. 7 - Early this year, ZeZe Inc. paid a 52,000 legal fee...Ch. 7 - In year 1, Firm A paid 50,000 cash to purchase a...Ch. 7 - Prob. 7APCh. 7 - Hansen Company, a cash basis taxpayer, paid 50,000...Ch. 7 - In year 0, Jarmex paid 55,000 for an overhaul of a...Ch. 7 - Prob. 10APCh. 7 - Refer to the facts in problem 10. In its second...Ch. 7 - In its first year of operations, Lima Company...Ch. 7 - Prob. 13APCh. 7 - Herelt Inc., a calendar year taxpayer, purchased...Ch. 7 - Knute Company purchased only one asset during its...Ch. 7 - Prob. 16APCh. 7 - Suber Inc., a calendar year taxpayer, purchased...Ch. 7 - Prob. 18APCh. 7 - Prob. 19APCh. 7 - On May 12, 2018, Nelson Inc. purchased eight...Ch. 7 - In March 2018, Jones Company purchased a Mercedes...Ch. 7 - Margo, a calendar year taxpayer, paid 580,000 for...Ch. 7 - In 2019, Firm L purchased machinery costing 21,300...Ch. 7 - In 2018, Company W elected under Section 179 to...Ch. 7 - Prob. 25APCh. 7 - At the beginning of its 2019 tax year, Hiram owned...Ch. 7 - In April 2019, Lenape Corporation completed...Ch. 7 - Ajax Inc. was formed on April 25 and elected a...Ch. 7 - Prob. 29APCh. 7 - Mr. Z, a calendar year taxpayer, opened a new car...Ch. 7 - Prob. 31APCh. 7 - Prob. 32APCh. 7 - Prob. 33APCh. 7 - Prob. 34APCh. 7 - Prob. 35APCh. 7 - Prob. 36APCh. 7 - Prob. 37APCh. 7 - Prob. 1IRPCh. 7 - Prob. 2IRPCh. 7 - Prob. 3IRPCh. 7 - Prob. 4IRPCh. 7 - Prob. 5IRPCh. 7 - Prob. 6IRPCh. 7 - Prob. 7IRPCh. 7 - Prob. 8IRPCh. 7 - Prob. 9IRPCh. 7 - Prob. 10IRPCh. 7 - Prob. 1RPCh. 7 - Prob. 2RPCh. 7 - Prob. 3RPCh. 7 - Prob. 4RPCh. 7 - Prob. 1TPCCh. 7 - Prob. 2TPCCh. 7 - Prob. 3TPCCh. 7 - Prob. 4TPC
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