On April 23, Mrs. Y purchased a taxi business from Mr. M for a $60,000 lump-sum price. The business consisted of a two-year-old taxicab worth $19,000, Mr. Mâ€™s license to operate a taxi business in Baltimore, his list of regular customers, and his registered business name "On Time Any Time Taxi." Mrs. Y operated the business from April 24 through the end of the year.a. Compute Mrs. Yâ€™s taxable income from the taxi business if her taxable income before any cost recovery deductions was $36,890.b. Compute Mrs. Yâ€™s taxable income from the taxi business if her taxable income before any cost recovery deductions was $17,100.

It must allocate [tex]\$19000[/tex] for both the taxicab and [tex]\$41,000[/tex] for the rest of the license, the client list, and the company name registered.

Its cost of intangible material could be amortized for 180 months starting in April. [tex](\frac{41,000}{180}) \times 9\ \ months = \$2,050[/tex] is her amortization deduction.

She could also use Section 179 to decrease her taxable money to [tex]\$17,890 (\$36,890 - \$19,000)[/tex] but include her deduction.

Her taxable annual income is [tex]\$15,840 (\$17,890 - \$2,050)[/tex].

In point b:

They must allocate [tex]\$19,000[/tex] for the taxi and[tex]\$41,000[/tex] for their licenses, the customer list as well as the business by interacting with people register. Its cost of the material could be depreciated for 180 months, starting in April.

[tex](\frac{41,000}{180}) \times 9\ \ months = \$2,050[/tex] is her amortization deduction.

The taxable income here [tex]= \$0 (from \ \$17,100 -\$19,000) = -1,900.[/tex]

Section 179 could be requested if another income is earned on the tax return (such as W-2 wages).

As all Section 179 is unpaid with other earned income, it is carried forward into the next year.