Chapter 6
5 Delta Corporation purchased 3 assets during the current year: an automobile costing $60,000, office furniture $260,000 and a warehouse costing $750,000. Which assets should Delta elect Section 179 expensing for and why? It should expense the $206,000 in furniture. The amount for the automobiles is over the limitation of $11,060. The warehouse is not eligible.
8 Why would a business elect to use the ADS straight-line method to compute regular income tax depreciation rather than the 200 percent declining-balance method allowed under MACRS Reasons to elect to use ADS straight-line: taxpayer is in low tax bracket but expects to be in higher bracket in the future, at a point near AMT, net operating loss in the current year there is no benefit from increased deduction for regular tax depreciation.
16 Two years ago, Warren purchased a computer for $4,000. Until this year, he used it exclusively for personal purposes. At the beginning of the current year, Warren opened a consulting business and began using the computer solely for business purposes. At the time he began his business, Warren’s computer was worth $600. What basis must Warren use in calculating his depreciation on the computer?

The fair market value, $600 at the date the asset started being used for his consulting business.

57 Jerry is considering purchasing a new hybrid automobile, such as a Ford Fusion Hybrid because he is attracted by the high fuel efficiency. When he started looking at new cars in Jan 2010 the car dealer told him that it was eligible for a special tax credit. What is the maximum special credit that Jerry is eligible for if he purchases a new Ford Fusion Hybrid in March 2010? Does it make any difference if he waits until October 2010?

March 2010-$3,400, October 2010 the tax credit is cut in after 4/1/10 to $1700 so it would be better to buy in March 2010