# Tax Incentives

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5. The corporation should expense \$192,000 of the furniture’s cost because the amount eligible to be expensed under Section 179 for automobiles is subject to the ceiling limitations for depreciation of automobiles. The warehouse is not eligible for Section 179 expensing because it is not personality.
17. \$125,000. Anne uses the lower of her basis or fair market value at the date the condo is converted from personal to rental property.
22. Azona’s first-year depreciation is \$550,000 consisting of \$275,000 (\$550,000 x
50%) additional bonus depreciation and \$55,000 [(\$550,000 - \$275,000) x 20%] regular MACRS depreciation. b. Azona’s first-year depreciation is \$320,000
57. a. Sidewalks are 15-year property; MACRS depreciation = 5% x \$6,000 = \$300. b. The barn is 20-year property; MACRS depreciation = 3.75% x \$120,000 = \$4,500. c. The tugboat is 10-year property; MACRS depreciation is 10% x \$85,000 = \$8,500.
21. a. DDF has \$507,000 (\$575,000 - \$68,000) Section 1231 gain on the land sale. It has a \$635,000 (\$125,000 - \$760,000) Section 1231 loss on the sale of the equipment. b. The \$635,000 loss is netted against the \$507,000 gain. The result is a \$128,000 net Section 1231 loss that is deducted against DDF Corporation’s ordinary
23. a. Machine 8: \$12,000 – \$14,000 = \$2,000 loss realized. Machine 6: \$24,000 - \$19,000 = \$5,000 gain realized.
b. The machines are Section 1231 property. The loss on Machine 8 is a Section 1231 loss; the gain on Machine 6 is ordinary income due to Section 1245 recapture because the gain is less than the prior depreciation deductions (\$45,000 - \$19,000 = \$26,000 accumulated depreciation).
c. The \$2,000 loss is deducted directly from ordinary income; the \$5,000 Section 1245 recapture is included directly in ordinary...

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