Category: Writing

MACRS Dispositions. Tampa Corporation sold the following
assets in 2019:
~ The half-year convention was used in the year of
acquisition. Tampa did not claim Sec. 179 expense or bonus depreciation during
the acquisition years.
a. What is the depreciation deduction for each asset in
2019?
b. Compute the gain or loss on each asset sold.

Sec. 179 Expensing and MACRS Depreciation. Turner
Corporation uses the calendar year as its tax year. It purchases and places
into service $1.97 million of property during 2019 to use in its business:
What is Turner’s total depreciation deduction for 2019 in
each of the following circumstances? Assume that Turner elects our of bonus
depreciation .
a. Turner does not claim Sec. 179 expensing.
b. Turner claims Sec. 179 expensing for $650,000 of the office
furniture’s cost and $370,000 of the office machinery’s cost.
c. Turner claims Sec. 179 expensing for $600,000 of the
office furniture’s cost and $420,000 of the office machinery’s cost.

1. Why is it desirable for a new taxpayer to select an
appropriate tax year?
2. What restrictions apply to partnerships selecting a tax
year?
3. Does a similar restriction apply to S corporations?
Explain.

The Morr iss Corporation is a very successful and profitable
manufacturing corporation. The corporation just comp leted construction of new
corporate offices, primarily for its top executives. The president and founder
of the corporat ion, Mr. Timothy Couch, is an avid collector of artwork and has
instructed that the lobby and selected offices be decorate d with rare
collections of art. These expensive works of arr were purchased by the corpora
– tion in accordance wit h Couch’s directives. Couch justified the purchase of
these artworks on the premise chat (1) they are excellent investments and
should increase in value in the future, (2) they provide an appropriate and
impressive office atmosp here when current and prospective customers visit the
corporation’s offices, and (3) the artwork is depreciable property and the
corporation will be able to rake sizable writeoffs against income. The
Financial Vice-President of the corporatio n has requested your advice as to
whether the works of arr are, in fact, depreciable property . Prepare a researc
h memorandum for the Financia l Vice-President on this issue.
A partia l list of research sources is provided below.
• Rev. Ru/. 68-232, 1968 -1 C.B. 79
• Shauna C. Clinger, 60 T.C.M. 598 (1990).
• Simon v. Comr., 103 T.C. 247 (199 4), aff’d, 95-2 USTC
150,552 (2d Cir. 1995) nonacq. 1996 -2 C.B.l.
• Liddle v. Comr., 103 T.C. 285 (1994), aff’d, 95-2 USTC
~50,488 (3rd Cir. 1995)

Refer to the facts in Problem 1:10-48 for John and Ellen
Brite. The following information is also available for them:
• John and Ellen live at 111 Maple Street, Johnsonville,
Colorado 81733.
• Brite-On is located at 3900 Marker Street, Johnsonville,
Colorado 81733. Its employer identification number is 44-1357924.
• The business uses the accrual method and did nor make any
payments char would require Form 1099 to be filed. Ir has used the cost method
ro value inventory for many years.
• John started using his automobile in his business on July
1, 2011. During 2018, it was used 7,000 miles for John’s business, 1,800 miles
for commuting, and 6,500 miles for other reasons. The automobile and Ellen’s
automobile were available for personal use and during off-duty hours. John has
written evidence to support his deduction for automobile expenses.
Complete the Brites’ 2018 Form 1040, Schedules 1, 4, 5, A,
C, and SE, and Forms 4562 and 4797.

Allowed Verstts Allowable Depreciation. Sandy acquired
business machinery (which qualified as 7-year MACRS property ) on July 15,
2016, for $10,000 . In 2016, Sandy claimed a $1,429 regular MACRS depreciation
deduct ion and she elected not co claim Sec. 179 depreciation or bonus
depreciation . Because of her low tax rate in 2017 – 2019, Sandy did nor claim
any depreciation deduction on her tax returns in those years. She sells the
machine on July 1, 2019, for $6,000.
a. What is the adjusted basis of the machine on the sale
date?
b. How much gain or loss is recognized on the sale of the
machine?

Thom Jones (SSN 000 -00-1111) is an unincorporated
manufacturer of widgets. He uses the LCM method to value his inventory and
reports the following for 2018:
The business operates under the name Jones Widger Company
and is located at 400 W. Main Street in Springfield, Maryland 21368. Its
employer identification number is 55-9876543. The business uses the cash
method, Thom materially participates in it, and it did nor make any payments
that would require it to file Form 1099. Complete Thom’s 2018 Form 4562 and
Schedule C of Form 1040, assuming he elects to expense the maximum amount
possible under Sec. 179 and uses bonus depreciation for any eligible amounts
exceeding the Sec. 179 maximum.

Woburn Corporation uses the calendar year as its tax year.
Woburn purchases and places into service $1.7 million of depreciable property
during 2019:
You are working in Woburn’s tax department and are trying co
decide how to make the Sec. 179 election so as to maximize Wobur n’s 2019
depreciation deduction . What tax issues should you consider for this decision?