In 2011, Theo purchases $16,000 of Section 179 property for use in his delivery business. During 2011, he has $12,000 in taxable income from his business. Assume that Theo elects not to claim bonus depreciation.
a. What is Theo's maximum Section 179 deduction in 2011? Explain.
b. Theo's business taxable income for 2012 is $5,000. He purchases $1,000 of new Section 179 property in 2012. What is Theo's maximum Section 179 deduction for 2012?