Question

Sam the Butcher acquires the following new five-year class property in 2020. Use $1,040,000 as the...

Sam the Butcher acquires the following new five-year class property in 2020. Use $1,040,000 as the maximum §179 amount:

Asset

Acquisition Date

Cost

A

January 10

$1,106,000

B

July 16

540,000

C

November 20

170,000

Sam elects §179 for Asset A only. Sam’s taxable income from the butcher shop would not create a limitation for purposes of the § 179 deduction. Sam elects not to take the additional first-year depreciation.

  1. Determine Sam’s depreciation deduction for each asset for 2020.

  1. Determine Sam’s total depreciation deduction for 2020.

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Answer #1

Based on the information available in the question, we can answer as follows:-

Asset Original cost Date placed in service Section 179 Depreciable base MACRS Asset Life(yrs) MACRS Depreciation rate MACRS cost recovery
Asset A 1,106,000 10/01/20 1,040,000 66,000 5 20.00% 13,200
Asset B 540,000 16/07/20 5 20.00% 108,000
Asset C 170,000 20/11/20 5 20.00% 34,000
142,000

The total Depreciation deduction for 2020 is $1,040,000 (Section 179) + $142,000 = $1,182,000

Please let me know if you have any questions via comments and all the best :) !

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