Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2018: All assets are used 100% for business use. The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000. The corporation has $3,000,000 income from operations before calculating depreciation deductions. Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2018. To maximize its total cost recovery deduction, what was Sanjuro Corporation's cost recovery deduction for the used office equipment for 2018?

Question

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2018:  All assets are used 100% for business use. The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000. The corporation has $3,000,000 income from operations before calculating depreciation deductions. Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2018. To maximize its total cost recovery deduction, what was Sanjuro Corporation's cost recovery deduction for the used office equipment for 2018?

Quizplus · Accepted Answer

The used office equipment has a depreciable basis of $1,000,000. Since Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2018, it can deduct the entire $1,000,000 cost of the used office equipment under bonus depreciation. Therefore, the cost recovery deduction for the used office equipment in 2018 is $1,000,000. (Note: The other assets would need to be considered to determine the total cost recovery deduction, but the question only asks for the deduction for the used office equipment.)

Sanjuro Corporation (A Calendar-Year Corporation) Purchased and Placed in Service