What is the maximum Section 179 deduction that ABC Corporation may claim this year given its taxable income?

The maximum Section 179 deduction that a corporation can claim is influenced by the total amount of qualifying property placed in service during the tax year, as well as the corporation’s taxable income. For the tax year in question, the limit for the Section 179 deduction has been set at $1,160,000, with a phase-out threshold beginning at $2,890,000.

The correct choice, $290,500, refers specifically to the potential limitation based on ABC Corporation's taxable income. If the taxable income of the corporation is less than the maximum allowable deduction for Section 179, the deduction is limited to the amount of taxable income. Therefore, if ABC Corporation’s taxable income is only $290,500, that is the maximum deduction it can utilize, despite the higher overall limit available for Section 179.

This emphasizes the concept that the Section 179 deduction cannot exceed the taxable income of the business, helping protect against tax deductions that might lead to a net operating loss. Thus, the company can only deduct what it earns, maintaining the practical limit imposed by its income level.