Question

Brett placed in service a new $1,400,000 seven-year class asset on August 2, 2017. On December 2, 2017, he placed in service $800,000 of used five-year class assets. Brett can't decide whether to use 179 on the 5-year property or the 7-year property. If Brett elects 179 and takes additional first-year depreciation on each eligible asset, what is the maximum cost recovery deduction under each of his two alternatives for these purchases in 2017?

Answer 1

Section 179 seta a maximum deduction limit of $500,000 for the tax year 2017. To avail the benefits of 179 the equipment must be purchased and put to service by 31/12/2017.

Another limit for the cost of equipment which can be putpfor 179 deduction in 2017 is $2,000,000. Hence both the assets of Brett cannot be claimed together for deduction in the same year.

Table below shows maximum cost recovery deduction for the two asset

Particulars	Amount(in $)	Amount (in $)
Cost of Asset	1,400,000	800,000
Sec 179 additional deduction	500,000	500,000
Bonus depreciation(50%)	450,000	150,000
Normal 1st year depreciation	90,000	30,000
Total first year decdutiod	1,040,000	680,000
Cash savings	364,000	238,000
cost of asset after tax savings	1,036,000	562,000