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. 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: $

Answer 1

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