Song Company, a calendar year taxpayer, purchased a total of $2,674,400 tangible personalty in 2020. How much of this cost can Song elect to expense under Section 179?
A) -0-
B) $1,040,000
C) $2,674,400
D) $955,600

Question

Quizplus · Accepted Answer

The maximum deduction under Section 179 for 2020 is $1,040,000. However, this deduction begins to phase out once the total amount of qualified property purchased exceeds $2,590,000. Since Song Company purchased $2,674,400 of tangible personalty, the phase-out rules apply. The deduction is reduced dollar for dollar for any amount over $2,590,000.

Calculation: 
$2,674,400 (total cost of tangible personalty) - $2,590,000 = $84,400 
$1,040,000 (maximum Section 179 deduction) - $84,400 = $955,600 (amount of cost that can be expensed)

Song Company, a Calendar Year Taxpayer, Purchased a Total of $2,674,400