Brett started a new construction business in April 2020. In connection with the new business, he purchased a new backhoe for $60,000 in June 2020 and immediately placed it in service. The new business is struggling and expecting to show a loss for 2020. Brett is considering expensing the $60,000 cost of the backhoe under §179 on the 2020 tax return. Brett has been awarded a large project for 2021, and will show a substantial profit (over $100,000) for the year ending 12/31/2021. Your response must fully address the following: Evaluate the appropriateness of Brett’s plan. Explain your position. How could changes in tax law affect the appropriateness of Brett's plan?
Brett started a new construction business in April 2020. In connection with the new business, he purchased a new backhoe for $60,000 in June 2020 and immediately placed it in service. The new business is struggling and expecting to show a loss for 2020. Brett is considering expensing the $60,000 cost of the backhoe under §179 on the 2020 tax return. Brett has been awarded a large project for 2021, and will show a substantial profit (over $100,000) for the year ending 12/31/2021. Your response must fully address the following: Evaluate the appropriateness of Brett’s plan. Explain your position. How could changes in tax law affect the appropriateness of Brett's plan?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Brett started a new construction business in April 2020. In connection with the new business, he purchased a new backhoe for $60,000 in June 2020 and immediately placed it in service. The new business is struggling and expecting to show a loss for 2020. Brett is considering expensing the $60,000 cost of the backhoe under §179 on the 2020 tax return. Brett has been awarded a large project for 2021, and will show a substantial profit (over $100,000) for the year ending 12/31/2021. Your response must fully address the following:
- Evaluate the appropriateness of Brett’s plan.
- Explain your position.
- How could changes in tax law affect the appropriateness of Brett's plan?
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