Question

On June 5, 2019, Javier Sanchez purchased and placed in service a new 7-year class asset costing $560,000 for use in his landscaping business, which he operates as a single-member LLC (Sanchez Landscaping LLC). During 2019, his business generated a net income of $945,780 before any § 179 immediate expense election.

1. Rather than using bonus depreciation, Javier would like to use § 179 to expense $200,000 of this asset and then use regular MACRS to cost recover the remaining cost. Given this information, determine the cost recovery deductions that Javier can claim with respect to this asset in 2019 and 2020.

Answer 1

Total cost recovery deduction in 2019
Section 179 Expense (Elected)	$ 200,000
Bonus Depreciation (not opted by Taxpayer)	$ 0
MACRS Depreciation (2019) - as per MACRS Table	$ 51,444
Total cost recovery deduction in 2019	$ 251,444

Total cost recovery deduction in 2020
Section 179 Expense (Elected)	$0
MACRS Depreciation (2020)- as per MACRS Table	$ 88,164
Total cost recovery deduction in 2020	$ 88,164

MACRS Depreciation Table

Total Cost of Asset	$           560,000
Section 179 Expense (Elected)	$        (200,000)
Basis for MACRS	$           360,000

Year	Rate	Amount
2019	14.29%	$ 51,444	[$ 360,000 * 14.29%]
2020	24.49%	$ 88,164	[$ 360,000 * 24.49%]