Elakin Inc

Essay

Elakin Inc., a calendar year taxpayer, paid $1,339,000 for machinery (seven-year recovery property) placed in service on August 29, 2014. The machinery was Elakin's only asset purchase during 2014, and Elakin's taxable income before any Section 179 deduction was $14 million.
a. Compute Elakin's 2014 cost recovery deduction with respect to the machinery.
b. How would your answer change if the cost of the machinery was $2,150,000 instead of $1,339,000?
c. How would your answer to a. change if Elakin's taxable income before any Section 179 deduction was $281,400 instead of $14 million?