Mary purchased a new five-year class asset on March 7, 2014. The asset was listed property (not an automobile). It was used 60% for business and the rest of the time for personal use. The asset cost $90,000. Mary made the § 179 election. The income from the business before the § 179 deduction was $60,000. Mary does not take additional first-year depreciation (if available). Determine the total deductions with respect to the asset for 2014.

Question

Quizplus · Accepted Answer

First, we need to calculate the §179 deduction: 
The maximum §179 deduction for 2014 is $25,000, but Mary's asset cost $90,000, so the deduction is limited to the cost of the asset. Therefore, the §179 deduction is $90,000.

The remaining cost of the asset is $0 ($90,000 - $90,000), so there is no depreciation deduction in 2014.

Mary's total deductions with respect to the asset for 2014 are: 
§179 deduction: $90,000
Depreciation deduction: $0
Total deductions: $90,000

However, the total deductions are limited to the business income before the §179 deduction: 
Total deductions: $90,000
Business income before §179 deduction: $60,000
Total deductions limited to business income: $60,000

Therefore, Mary's total deductions with respect to the asset for 2014 are $60,000 (limited to business income), which includes the §179 deduction of $90,000 and no depreciation deduction.

So, choice C is the correct answer.

Mary Purchased a New Five-Year Class Asset on March 7