Question

Taxpayer purchased one new asset during the year (five-year property) on April 10, 2017, at a...

Taxpayer purchased one new asset during the year (five-year property) on April 10, 2017, at a cost of $660,000. Taxpayer would like to use the § 179 election but will not take additional first-year depreciation. The income from the business before the cost recovery deduction and the § 179 deduction was $600,000. Determine the total cost recovery deduction with respect to the asset for 2017.

A. $510,000

B. $30,500

C. None of these choices are correct.

D. $588,750

E. $585,000

Business   Accounting   
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Homework Answers

Answer #1

The mid-quarter convention applies to the MACRS calculation

§ 179 expense = $ 500000

Additional first-year depreciation [($660,000 – $500,000) * .50] = 80000

MACRS cost recovery ($80,000 × .05) = $ 4000

Total = 84000

Income from the business before cost recovery = $600,000

Less: Total cost recovery = (84,000)

§ 179 business income limitation = 516000

Hence, taxpayers total cost recovery deduction is $584,000 ($500,000 + $84,000)

ANSWER =C) None of these choices are correct.

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