Bill is the owner and CEO of Blue Trucking Co. Bill noticed that Blue's small fleet of 5 pickup trucks is aging considerably and that the fleet is starting to have mechanical problems.

Therefore, Blue disposes of its old fleet and purchases 5 new semi-trucks that cost $100,000 each. The trucks are placed in service on January 1, 2018.

Bill thinks that the new fleet and other factors will cause a sharp increase in revenue for Blue in 2018. Bob has not purchased any other property during the year:

a. May Bill deduct depreciation expense for the trucks? Which code section and regulation provide Bill permission to deduct the trucks' depreciation?

 b. What code section should be used to determine the initial cost basis needed to calculate depreciation for the semi-trucks?

c. Are there rules that might allow Bill to skip depreciation on the trucks and expense all of his costs in 2018? Which statutory provisions allow this?

 i. Are there any factual tests that Bill must satisfy to take bonus depreciation?

 ii. Are there any factual tests that Bill must satisfy to take a code section 179 deduction?

iii. Will the deduction for bonus depreciation or code section 179 lower Bob's cost basis in the trucks? 

Answer rating: 100% (QA)

a Yes Bill may deduct depreciation expense for the trucks The trucks are considered depreciable prop... View the full answer