Eduardo Is a Single Taxpayer with a Farming Operation That

question 68

Essay

Eduardo is a single taxpayer with a farming operation that suffered a net loss of $30,000 in 2018. In addition, he earned $50,000 from his accounting firm. Eduardo purchased $50,000 of equipment for his farm. He wants to maximize his cost recovery deduction and believes the Section 179 election will help achieve that goal. What is the amount of the maximum Section 179 deduction Eduardo can use? Explain the optimum approach to attain his goal. Assume Eduardo's total taxable business income in 2019 will be $60,000, and he plans to add about $20,000 of equipment to the farm operation.

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Definitions:

Dividends

Distributions from a company to its shareholders, usually coming from the firm's earnings.

Cumulative Preferred Stock

A type of preferred stock that accrues dividends in the event that any dividends are missed, ensuring that preferred shareholders are paid both missed and current dividends before any are paid to common shareholders.

Common Stock

A type of equity security that represents ownership in a corporation, with voting rights and potential for dividends.

Dividends

Distributions made to shareholders by a company, often from its earnings.