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The Shadow Corp, a calendar year taxpayer, began business this year and incurred the following costs on 06/05/2021. All assets were immediately placed into service:

• Purchase of computer for $20,000. The Shadow Corp paid $1,000 for a specialist to install the computer.
• Purchase of used office furniture for $15,000
• Purchase of new office furniture for $30,000
• Purchase of equipment for $105,000
• Purchase of warehouse for $500,000 cash. The Shadow Corp paid $15,000 of commissions to their real estate agent in connection with this purchase.
• Purchase of factory for $1,000,000
• Purchase of delivery (passenger) automobile for $60,000

The Shadow Corp also incurred $10,000 of due diligence (business investigation) expenses and $65,000 of legal costs related to business creation between 1/1/2021 and 06/04/2021.

Part 1: Please calculate the 2021 depreciation deduction and amortization deduction under the following scenarios:

Scenario 1: The Shadow Corp takes bonus depreciation on all eligible assets (except the automobile please do not calculate bonus or 179 for the auto)

Scenario 2: The Shadow Corp elects not to take bonus depreciation and their taxable income is -$25,000

Part 2: How would your answer change in Part 1, Scenario 2 if the assets were all placed into service on 10/18/2021?

Part 3: Use the information you calculated for Part 1, Scenario 2. On 09/05/2024, The Shadow Corp sells the following assets:

• Used office furniture sold for $5,000
• Equipment sold for $110,000
• Warehouse sold for $510,000

Please determine:

(1) the recognized tax gain/loss on each asset,

(2) the depreciation recapture (1245,1250,291), and

(3) the character of the gain (ordinary vs long-term capital)

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