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Problem $8-15$

Modified Accelerated Cost Recovery System $($MACRS$)$ and Bonus Depreciation, Election to Expense $($Section $179)($LO $8\mathrm{.}2,8\mathrm{.}3)$

Tom has a successful business with $$100,000$ of taxable income before the election to expense in $2023.$ He purchases one new asset in $2023,$ a new machine which is seven$-$year MACRS property and costs $$25,000.$

You are Tom's tax advisor. Complete the memorandum regarding the options you would advise for Tom and the treatment of this machine for tax purposes in $2023.$

Click here to access the depreciation table.

If required, round your final answers to the nearest dollar.

Memorandum

To: Tom Businessman

From: Tax Advisor

One option is to utilize Section $179$ which, by election, would allow you to expense $ of the cost of the machine in $2023.$ If the Section $179$ election is not made and assuming no bonus depreciation is taken, you would be allowed a MACRS deduction of $ $.$ Bottom line, I would recommend the Section $179$ election

$$ to maximize your tax benefit in $2023.$

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