Video instructions and help with filling out and completing Where Form 1065 Schedule M 3 Depreciation

Instructions and Help about Where Form 1065 Schedule M 3 Depreciation

Hello and welcome to the session this is Professor Farhad and this session we're going to be looking at depreciation and cost recovery and specifically we're going to be looking at section 179 this topic is covered in an income facts course CPA exam regulation section as well as the enrolled agent exam now as always I would like to remind my students to connect with me on a personal as well as a professional level so please link with me on LinkedIn I do post my lectures there as well as other related CPA and accounting news so you're always informed if you are a Facebook user please like my Facebook page accounting lectures and you can connect with me on a personal level you want to make sure you subscribe to my youtube because this is where I house all my lectures please like them share them and if you know anyone's interested send them the link I do have a Twitter account and I do house some of my lectures on my website organized by chapter and course now this recording is brought to you by j ger CPA Review on Yeager if you like this recording you can find hundreds of hours of video lectures if you're a CPA student or if you are a college students you can supplement your studies with thousands of multiple-choice questions with answers simulations textbook including a physical textbook for the CPA exam audio lectures for retention purposes electronic flash cards plus others if you happen to use Yaeger use the PMF code and you will get 10% off of the best valued CPA course out there you will benefit yourself and benefit this channel so let's talk about section 179 first of all section 179 is an election so if you'd like to take this election you can if you choose not to you don't have to take the election so first we're going to look at the general rules at section 179 first basically you can deduct up to $1,000,000 of been business tangible personal property now remember we have personal property and we have real property real property is property such as land building warehouses real property and movable objects well that's not what we are going to be discussing here section 179 applies to purse property placed in service in 2018 now just want to let you know that our certain real property items they're not real property are okay you can suck section 179 applies to them roofs heating ventilation air conditioning fire protection alarm and security systems so they are okay they do not consider real property okay you cannot use section 179 one more time for most real property real property what we're talking about is office building rental rental building okay warehouses it's not allowed section seven 179 is not allowed or production of income property again or talking about rental now obviously if you expense anything under section 179 it's gonna reduce your basis and this is the it's one that it just wanted to mention it it's basically it's like you're taking the appreciation okay and also you need to know that any elected 170 179 expenses they can be for an additional first year depreciation is computed don't worry we'll talk about this additional first year depreciation in the next session just know this and we're gonna discuss this again now just to give you an idea how section 179 work so if you think 1 million is a lot it is a lot for a deduction in a year but let me show you when section 179 started it was $10,000 we can deduct the $10,000 between 87 to 92 and notice it kept increasing increasing increasing and after bust they raised it to 100,000 the increase that a little a little a little then in 2007 2008 they double it it went from 125 to 250 with President Obama because they wanted to stimulate the economy then they double it again to half-a-million then President Trump doubled again to a million this is what would work in with now it's a million dollar now you might be saying what's this column for investment limitation will talk about the limitation next I just wanted to show you that section 179 started at at $10,000 so he can deduct $10,000 and now he can deduct up to $1,000,000 okay so the government is becoming more gender especially with President Trump now the best way to illustrate section 117 I'll just start with an example just to get the feeling of how does it affect your taxable income and basis let's take a look at Alison she acquires and places in service a five-year class property on February 1st 2018 at a cost of 80,000 it's the only asset she placed in service if Alison elect 179 she can deduct the entire amount would assume no limitation here okay so basically if she took section 179 deduction she can deduct $80,000 assuming there is no limitation we'll talk up about the limitation later her other option is to go through makers so she goes through makers she would only take 16,000 and 2018 she will take twenty five thousand six hundred and twenty nineteen so on and so forth she will take the fine the 80 thousand over a period of five years so those are her two options so she can take section 179 or she can deduct it over a period of five years to 80 thousand now we have to keep in mind that's gonna affect her basis what do we mean by that it's gonna affect her basis what happened if she sells this asset so let's assume she sells this asset in 2020 sure she sells the asset right here in 2020 if Alison elect the section 179 her basis obviously is zero if she elected 179 she started with eighty thousand she