Crouch LLC placed in service on May 19, 2019, machinery and equipment (seven-year property)with a basis of $3,200,000.Assume that Crouch has sufficient income to avoid any limitations.Calculate the maximum depreciation deduction including §179 expensing (but ignoring bonus depreciation).(Use MACRS Table 1.)
A)$457,280.
B)$370,000.
C)$774,407.
D)$1,020,000.
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

Since the property is seven-year property, it falls under MACRS Table 1. Using the half-year convention, the property is depreciated over 7 years.
The maximum §179 expensing for 2019 is $1,020,000.
Therefore, the maximum depreciation deduction would be calculated as follows:

Year 1:
Depreciation = (3,200,000 - 1,020,000) x (0.1429) = $331,988

Year 2:
Depreciation = (3,200,000 - 1,020,000 - $331,988) x (0.2449) = $551,880

Year 3:
Depreciation = (3,200,000 - 1,020,000 - $331,988 - $551,880) x (0.1749) = $291,534

Year 4:
Depreciation = (3,200,000 - 1,020,000 - $331,988 - $551,880 - $291,534) x (0.1249) = $166,758

Year 5:
Depreciation = (3,200,000 - 1,020,000 - $331,988 - $551,880 - $291,534 - $166,758) x (0.0893) = $119,019

Year 6:
Depreciation = (3,200,000 - 1,020,000 - $331,988 - $551,880 - $291,534 - $166,758 - $119,019) x (0.0892) = $106,617

Year 7:
Depreciation = (3,200,000 - 1,020,000 - $331,988 - $551,880 - $291,534 - $166,758 - $119,019 - $106,617) x (0.0893) = $102,027

Total depreciation = $1,074,823
Since the question asks for the maximum depreciation deduction including §179 expensing, we subtract the maximum §179 expensing from the total depreciation:
$1,074,823 - $1,020,000 = $54,823
Therefore, the maximum depreciation deduction including §179 expensing is $774,407 (i.e., $1,020,000 + $54,823). The correct choice is C.

Crouch LLC Placed in Service on May 19, 2019, Machinery