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. 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.
If required round your intermediate computations and final answers to the nearest dollar. Click here to access the depreciation table to use for this problem.
a. Determine the cost recovery deductions
(including first year additional depreciation) that Javier Sanchez
can claim with respect to this asset in 2019 and 2020.
Total cost recovery deduction in 2019: $
Total cost recovery deduction in 2020: $
Date of Asset purchased and placed in service : June 5, 2019
Description of property : Landscaping equipment
Cost of Asset : $ 560,000
Below is computation for cost recovery deduction for year 2019 & 2020 for Sanchez Landscaping LLC
Total cost recovery deduction in 2018
Section 179 Expense (Elected) $ 200,000
Bonus Depreciation (not opted by Taxpayer) $ 0
MACRS Depreciation (2018) - 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 2019 $ 88,164
MACRS Depreciation Table
Total Cost of Asset $ 560,000
Section 179 Expense (Elected) $ (200,000)
Basis for MACRS $ 360,000
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