[mastrocl]

I don’t understand this question at all – can someone explain?

White Company acquires a machine (seven-year property) on January 10 of the current year, at a cost of $950,000. It was the only purchase of machinery White made in the current year. White makes the election to expense the maximum amount under §179. No election is made to use the straight-line method. Determine the total §179 deduction related to the machine for the current year assuming White has taxable income of $700,000 and assuming the rules in effect for the year 2014:

$50,000

$100,000

$0

$950,000

Answer is $0 but I don’t understand why.

FAR - 76
AUD - 97
BEC - 91
REG - FEB-16

[Anonymous]

Under sec 179 expense rule, you can expense the cost up to $25000 for 2015 but there is phase out rule which is dollar for dollar reduction if the cost of qualifying property exceeds $200,000.so there is complete phase out if the cost increases up to $225,000
because the cost of the machine is $950000, white cannot expense the $25,000 as per sec 179 expense rule.

[mastrocl]

Thank you!!

FAR - 76
AUD - 97
BEC - 91
REG - FEB-16

[Future Ninja]

@Ano – how about this? help me please. thank you!

In 2015, Micro Corp. purchases a machine to be used in its business. The machine qualifies as Section 179 property. The cost of the machine is $2,043,500. What is the amount of Section 179 deduction that Micro Corp. may take in 2015?

A. $0
B. $456,500
C. $206,500
D. $500,000

AUD - 79 (expired) retaking July 28,2016
FAR - 76 expiring July 31, 2016
BEC - 85
REG - 74,74,74,74,59,70,

[mastrocl]

is it A $0 again?

FAR - 76
AUD - 97
BEC - 91
REG - FEB-16

[Anonymous]

This is why I hope the exam specifies which deduction amount it'll be. Current law says it'll be $500,000 deduction as long as it's under $2,000,000. So the answer @FutureNinja for your second problem is B) $456,500

[mastrocl]

Becker is still showing the correct answer as $0

FAR - 76
AUD - 97
BEC - 91
REG - FEB-16

[mastrocl]

on this question below, in the solution, it says “other income” consists of gambling winnings of $15k. Why wouldn't the $27k in gambling losses offset this amount down to $0?

Brian Cartwright is a single taxpayer who itemizes deductions and has no dependents. In 20X5, he earned wages of $200,000 from Brandise Corporation, a newly-formed C Corporation of which he is the sole shareholder and only employee. Brandise is not considered to be a personal service corporation or a personal holding company.

In addition, since 20X2 Brian has owned a 50% interest in Technology Plus, Inc., an S Corporation from which he was paid a salary and received distributions in 20X5 (each paid according to the ratio of ownership). Brian is also a 10% limited partner in Wonderland Resorts, a limited liability partnership, which paid him no distributions in 20X5 and in which he had a $300,000 basis at 12/31/X4.

Technology Plus, Inc. and Wonderland Resorts, LLP each issued Brian a K-1 for the tax year 20X5 (detail provided below). Brian also received 1099s for taxable interest income from banks in the amount of $3,500 and $15,000 in gambling winnings from a casino.

In addition, Brian owns a fully-depreciated residential rental unit that had income of $25,000 and deductible expenses of $20,000. There are no passive loss carryforward amounts.

Brian made no pension or IRA contributions of any kind for the year 20X5 and does not plan to do so. He had verifiable gambling losses of $27,000 and is not considered a professional gambler. In 20X4, Brian created a long-term capital loss carryforward from the sale of stock in the amount of $35,000.

FAR - 76
AUD - 97
BEC - 91
REG - FEB-16

[Anonymous]

@ future for 2015 sec179 expense rule is $25,000 and dollar for dollar phase-out if qualifying property value exceed from$200,000
so as per this rule answer will be 0
or if the question is based on the rule of $500000 and 2000000 then the answer will be B $500000-43500=456500.

[taxgeek83]

Re: Gambling winnings/losses question

Gambling winnings are reported as “other income” on line 21 of the 1040. The offset happens on Schedule A, Itemized Deductions. In this situation the taxpayer itemizes, so the winnings will offset; however, a taxpayer who does not itemize does not get the benefit of the gambling losses offset.

Hope that makes sense. 🙂

[Author]

Replies