YumYum Corporation (a calendar-year corporation) moved into a new office building adjacent to its manufacturing plant in 2018. It purchased and placed in service the following assets during 2018: All assets are used 100% for business use. The office building does not include the cost of the land on which it is located that was an additional $300,000. The corporation had $900,000 income from operations before calculating depreciation deductions. What is the maximum Section 179 deduction YumYum can claim for 2018?

Question

YumYum Corporation (a calendar-year corporation) moved into a new office building adjacent to its manufacturing plant in 2018. It purchased and placed in service the following assets during 2018:  All assets are used 100% for business use. The office building does not include the cost of the land on which it is located that was an additional $300,000. The corporation had $900,000 income from operations before calculating depreciation deductions. What is the maximum Section 179 deduction YumYum can claim for 2018?

Quizplus · Accepted Answer

To determine the maximum Section 179 deduction that YumYum can claim for 2018, we first need to add up the cost of the assets purchased and placed in service during the year.

$400,000 (Office building) + $50,000 (computer and peripherals) + $30,000 (furniture and fixtures) = $480,000

We then need to check the Section 179 deduction limit for 2018, which is $1,000,000.

Since YumYum's total asset cost of $480,000 is below this limit, they can deduct the full amount under Section 179.

However, we also need to consider the taxable income limitation.

YumYum had $900,000 income from operations before calculating depreciation deductions. This means that their Section 179 deduction is limited to $520,000 ($1,000,000 limit - $480,000 asset cost).

Therefore, the maximum Section 179 deduction that YumYum can claim for 2018 is $208,000 ($520,000 x 40%).

The correct answer is C.

YumYum Corporation (A Calendar-Year Corporation) Moved into a New Office