Mary purchased a new five-year class asset on March 7,2013.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 $900,000.Mary made the § 179 election.The income from the business before the § 179 deduction was $600,000.Mary does take additional first-year depreciation.Determine the total deductions with respect to the asset for 2013.
A)$72,000.
B)$271,600.
C)$524,000.
D)$600,000.
E)None of the above.

Question

Quizplus · Accepted Answer

Mary can take a § 179 deduction up to the business income limit of $600,000, but only for the business-use portion of the asset. The business-use portion of the asset is 60% of $900,000, which is $540,000. Therefore, the § 179 deduction is limited to $540,000. Since she also takes additional first-year depreciation, she can deduct 50% of the remaining basis ($360,000) after the § 179 deduction, which is $180,000. The total deduction is $540,000 (Section 179) + $180,000 (bonus depreciation) = $720,000. However, the deduction cannot exceed the business income, so it is limited to $600,000.

Mary Purchased a New Five-Year Class Asset on March 7,2013