ACCT 3307/ACCT5311 – Individual Income Tax Accounting
Dr. John J. Masselli, CPA
In Class Case #4
Answer the following questions involving the deductibility of business expenses, depreciation or
amortization. Assume the taxpayer elects out of all bonus depreciation provisions.
1. Jason acquires a computer system for his business. The system cost $8,500 as was acquired on
6/30/09. What is his depreciation deduction for 2009? What is his depreciation deduction for 2011?
Assume that he does not elect Sec. 179.
2. In question 1 above, assume that Jason also acquired office equipment for $15,000 on 12/31/09. What
is his depreciation deduction for 2009 on the computer system and on the office equipment assuming
that he does not elect Sec. 179. What are the depreciation deductions in 2012for the same assets?
3. Michael owns a business. The business purchases a car so that he can travel to clients. The
automobile is a 2009 Lexus sedan that weight less than 6,000 pounds and cost the company $40,000.
The auto was purchased on 1/1/09. What is the depreciation deduction in 2009? How many years will
it take to fully depreciate the auto assuming it is used solely for business? How would your answer
change if instead Michael a delivery van weighing 6,050 pounds for $55,000?
4. Ann and Joe own a plumbing business. They purchase a building to serve as an office for the business.
The building cost $150,000 of which $30,000 represented the cost of the land. If they purchased the
building on 3/15/09, what is their depreciation deduction for 2009? What is their depreciation
deduction for 2012?
5. Chris and Shirley purchase a home on December 1, 2009 for the purpose of renting it to tenants. It is a
residential property. The cost of the building is 150,000 of which $30,000 represents the value of the
land. What is their depreciation deduction for 2009?
6. Robert and Vicky purchase the following business assets on 3/15/2009: 1) a computer system for
$33,000, 2) office furniture for $168,000, 3) business machinery for $58,000. They want to maximize
their deductions for depreciation in 2009. What is the maximum depreciation deduction, including
Sec. 179 they can take in 2009? Assume that they have sufficient profit to maximize their Section 179
7. AJ Global, Inc. is created on 1/1/09. They pay legal and accounting fees to form the corporation of
$10,000. AJ Global purchases a business on April 1, 2009. They pay $30,000 for goodwill and
$10,000 for covenant not to compete. How much amortization in total can the company take in 2009.