Nora owns C-C Bakery and has been operated for three years. Nora intends to expand her business and is planning to buy some equipment for her store and will place them into service on 2/1/2016. These assets include a new oven, a new bakery display case, a new connected refrigerator and freezer, a used commercial mixer. Additionally, Nora intends to add some leasehold improvements to the building.
Whether these assets qualify? How can Nora apply bonus depreciation, and any other deprecation available for the assets she will place into service on 2/1/2016?
澳洲IT代写_澳洲pte代考_代考一般多少钱 Since Nora’s Bakery is a C corporation, there is a corporate income tax pay imposed for each taxable year on taxable income of Nora’s Bakery (IRC § 11). A corporate’s taxable income equals to the gross income minus the deductions allowed by the IRC § 179 (IRC § 63). Bonus depreciation refers to the 30% or 50% additional first year depreciation deduction for qualified property regulated by IRC § 1.168 (k). Whether Nora could apply depreciation depends on whether the assets are qualified on the depreciation standards.
澳洲IT代写_澳洲pte代考_代考一般多少钱Pertinent laws are listed and analyzed as follows. The IRC § 179 regulated that taxpayers may apply deduction for the cost of property regulated by section 179 for the taxable year (IRC § 179). Yet the overall cost should not exceed 1 million dollars and shall not exceed the overall taxable income derives from the taxpayer’s trades or businesses during the taxable year (IRC § 179). Qualified assets must be tangible property or computer software, acquired through purchase for trade or business purpose (IRC § 179), excluding property mainly for lodging furnish use (IRC § 50). As for bonus depreciation, qualified 50 % bonus depreciation property includes MACRS property with a 20-year or less recovery period (IRC § 1.168 (k) (2)), and qualified leasehold improvement property; the original use of the assets was after May 5, 2003. MACRS property is tangible, depreciable property put into service after December 31, 1986 (IRC § 1.168 (k) (a)).
Qualified leasehold improvement property shall be improvements to an interior portion of a nonresidential real property, and shall not be improvements such as enlarging the building, adding elevator, changing internal structural framework; the improvement should be the first time over at least 3 years (IRC § 1.168 (k) (c)(2).In order to apply the 30% bonus depreciation, the property should be placed in service after September 10, 2001. Notably, if a person initially acquires new property for personal use, and the taxpayer acquires the property from that person for business use, the taxpayer is not considered as the original user of the property, and hence cannot apply for bonus depreciation (IRC § 1.168 (k) (a)(3)). Qualified taxpayers should apply according to requirements set by IRC § 1.168 (k) (e) by due date, and every taxpayer can only apply for a kind of bonus depreciation, while those qualified for the 50% bonus depreciation can choose to apply the 30% bonus depreciation IRC § 1.168 (k).
澳洲IT代写_澳洲pte代考_代考一般多少钱The costs of these new assets are $37, 000 in total, and is less than the Bakery’s average annual profits $ 500, 000. Therefore, Nora’s investment, in terms of the value, qualifies the IRC §179’s requirements for deduction. The new oven, new bakery display case, and new connected refrigerator and freezer would be first put in use after 2003 for business use, and tend to have recovery period of less than 20 years, so these assets are qualified for the 50% bonus depreciation. Since Nora would not be the original user of the used commercial mixer, it is not qualified for neither of the bonus depreciation; but it still satisfies the normal deduction requirements. As for expenses on the leasehold improvements, if Nora could improve under the IRC § 1.168 (k) (a)(3), as the building was the first time to be improved, this investment could meet the requirements of 50% bonus depreciation.
澳洲IT代写_澳洲pte代考_代考一般多少钱Based on forgoing analysis, $32, 000 of Nora’s investment is qualified for applying the 50% bonus depreciation, while the used commercial mixer, which worth $5,000, is qualified for normal deduction. Additionally, Nora should make applicable election by due date. Otherwise, the application would fail.