(3) Phase-out threshold 50,000 §195 (4) Immediate expense phase-out $0 (2) – (3); not less than $0 Allowable immediate expense $5,000 (5) (1) (4) – (6) Remaining costs $12,000 (2) (5) – (7) Recovery period in months 180 15 years §195 (8) Monthly straight-line amortization 66.67 (6) / (7) October through (9) ISys’ business months during year 1 x 3 December Year 1 straight-line amortization for costs $200 (8) x (9) Y2 Cost Recovery Cost Original Remaining Recovery Asset Basis Expense Basis Quarter Rate Expense $15,000 $15,000 4th 38.00% $5,700 Computer Equipment $10,000 $10,000 4th 27.55% $2,755 Office Equipment $3,000 $3,000 4th 27.55% $827 Furniture $66.67 $17,000 $5,000 $12,000 N/A x 12 $800 Start-up costs $18,000 HY 20.00% $3,600 Delivery van $4,000 HY 14.29% $572 Pinball machine See $10,000 N/A $500 Customer List Total Cost Recovery Expense $14,754 Description Amount Explanation $10,000 (1) Customer list (section 197 intangible) (2) Recovery period in months 180 Section 197 (3) Monthly straight-line amortization 55.56 (1) / (2) (4) April through December x 9 Year 1 straight-line amortization for customer list $500 (3) x (4) ISys Answers’ form 4562 is as follows:
(3) Phase-out threshold 50,000 §195 (4) Immediate expense phase-out $0 (2) – (3); not less than $0 (5) Allowable immediate expense $5,000 (1) – (4) (6) Remaining costs $12,000 (2) – (5) (7) Recovery period in months 180 15 years §195 (8) Monthly straight-line amortization 66.67 (6) / (7) (9) ISys’ business months during year 1 x 3 October through December Year 1 straight-line amortization for costs $200 (8) x (9) Y2 Cost Recovery Asset Original Basis Expense Remaining Basis Quarter Rate Cost Recovery Expense Computer Equipment $15,000 $15,000 4th 38.00% $5,700 Office Equipment $10,000 $10,000 4th 27.55% $2,755 Furniture $3,000 $3,000 4th 27.55% $827 Start-up costs $17,000 $5,000 $12,000 N/A $66.67 x 12 $800 Delivery van $18,000 HY 20.00% $3,600 Pinball machine $4,000 HY 14.29% $572 Customer List $10,000 N/A See $500 Total Cost Recovery Expense $14,754 Description Amount Explanation (1) Customer list (section 197 intangible) $10,000 (2) Recovery period in months 180 Section 197 (3) Monthly straight-line amortization 55.56 (1) / (2) (4) April through December x 9 Year 1 straight-line amortization for customer list $500 (3) x (4) ISys Answers’ form 4562 is as follows:
Solution-Manual-for-Taxation-of-Business-Entities-6th-Edition-by-Spilker.docx