The only asset Bill purchased during 2013 was a new seven-year class asset.The asset,which was listed property,was acquired on June 17 at a cost of $50,000.The asset was used 40% for business,30% for the production of income,and the rest of the time for personal use.Bill always elects to expense the maximum amount under § 179 whenever it is applicable.The net income from the business before the § 179 deduction is $100,000.Determine Bill's maximum deduction with respect to the property for 2013.
A)$1,428.
B)$2,499.
C)$26,749.
D)$33,375.
E)None of the above.

Question

Quizplus · Accepted Answer

The asset is used 70% for business and income production (40% + 30%), which qualifies it for a § 179 deduction. However, the deduction is limited to the business use percentage. The maximum § 179 deduction for 2013 is $500,000, but Bill can only deduct 70% of the asset's cost ($50,000 x 70% = $35,000). The business use portion of the cost is $20,000 ($50,000 x 40%). The MACRS depreciation for the first year for a 7-year property is 14.29%, but only 40% of this is deductible for business use. Therefore, the maximum deduction is $2,499 ($50,000 x 14.29% x 40%).

The Only Asset Bill Purchased During 2013 Was a New