100 % Bonus Depreciation

Client is a C Corp with small 179 carry forward and about 30K in profits. Profit includes the gain on trade in of a truck, which is no longer allowed to be a like kind exchange.

New truck is eligible for 100% depreciation, which would result an NOL in the $40K range. The Corp will have to generate profits to provide the cash flow necessary to amortize the loan principal, which should take up the NOL in future years. The client could elect out of the bonus, but I am not sure thats advisable.

What factors should I be considering here, beyond the above?

The limit on deducting post-2017 NOLs to 80% of income is the first thing that comes to mind. How would §179 (which in a loss year does not carry over as a NOL) work for your client?

I kept thinking I was missing something. That was it. Got that the NOL was not carried back, but something was buggging me.

179 carry over should work here. Reduces taxable income to zero and may have a positive efffect on the state which is decoupled.

Thanks for the wake up. Brain is in off season mode and needed a bit of a kick.

I believe there is an election to use 50% bonus in lieu of 100%, if you do not need all that NOL. That may only be for 2017 returns that also acquired qualified assets after 9/27/17. Just checked the rules: For property placed in service in a taxpayer's first tax year ending after Sept. 27 2017, a taxpayer can elect to apply a 50% bonus depreciation rate.

But there is nothing wrong with "frontloading" the NOL now knowing it will be substantially utilized in the near future.