Chapter 10, Problem 76CP

Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2018. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2018:

During 2018, Karane was very successful (and had no §179 limitations) and decided to acquire more assets in 2019 to increase its production capacity. These are the assets acquired during 2019:

Karane generated taxable income in 2019 of $1,732,500 for purposes of computing the §179 expense limitation.

Required

1. a) Compute the maximum 2018 depreciation deductions, including §179 expense (ignoring bonus depreciation).
2. b) Compute the maximum 2019 depreciation deductions, including §179 expense (ignoring bonus depreciation).
3. c) Compute the maximum 2019 depreciation deductions, including §179 expense, but now assume that Karane would like to take bonus depreciation.
4. d) Now assume that during 2019, Karane decides to buy a competitor’s assets for a purchase price of $1,350,000. Compute the maximum 2019 cost recovery, including §179 expense and bonus depreciation. Karane purchased the following assets for the lump-sum purchase price:

1. e) Complete Part I of Form 4562 for part (b) (use the most current form available).