B&P Inc., a calendar year corporation, purchased only one operating asset during 2016: $599,900 of computer equipment (5-year recovery property) placed in service on March 18. Assuming that B&P makes a Section 179 election, compute B&P's adjusted tax basis in the property at the end of 2016.

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Section 179 allows a business to immediately expense up to a certain amount of the cost of qualifying property, such as computer equipment. In the current year, the maximum Section 179 deduction is $500,000. Since B&P only purchased one asset worth $599,900, they are eligible for the full deduction. Therefore, the adjusted tax basis in the property at the end of 2016 would be $599,900 - $500,000 = $99,900. In addition, since the property is 5-year recovery property, it would be subject to MACRS depreciation. Using the half-year convention, the depreciation expense for the first year would be $60,032, bringing the adjusted tax basis down to $79,868. However, since the Section 179 expense is limited to taxable income, the remaining amount of $79,920 would be carried forward to future years.

B&P Inc, a Calendar Year Corporation, Purchased Only One Operating Asset