Chipper, a calendar-year corporation, purchased new machinery for $1,135,000 in February, 2019.In October, it purchased $2,105,000 of used machinery.What is Chipper's maximum cost recovery deduction for 2019?
A)$1,243,621
B)$3,240,000
C)$1,038,114
D)$577,226

Question

Quizplus · Accepted Answer

The maximum cost recovery deduction for 2019 includes both the Section 179 expense deduction and bonus depreciation. Chipper can take a Section 179 deduction of up to $1,020,000 for the new machinery (assuming it falls within the Section 179 property and doesn't exceed the phase-out threshold). The remaining cost of the new machinery and the cost of the used machinery can be subject to 100% bonus depreciation. Therefore, the total deduction is the sum of the maximum Section 179 deduction and the bonus depreciation on the full cost of both the new and used machinery, which equals $3,240,000.

Chipper, a Calendar-Year Corporation, Purchased New Machinery for $1,135,000 in February