The Cox Accounting Firm places the following property in service during the 2013 tax year:
$\begin{array}{llll}
\text { Froperty } & \text { Placed in } & \
\text { Description } & \text { Service } & \text { MACRS Life } & \text { Cost Basis }\
\text { Computers } & \text { Feb } 6 & 5 \text { years } & \$ 80,000 \
\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 70,000 \
\text { Fax machine } & \text { Aug } 3 & 5 \text { years } & \$ 100,000 \
\text { Phone system } & \text { Dec } 11 & 5 \text { years } & \$ 50,000
\end{array}$
Cox wants to obtain the maximum possible first year depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179.Cox will report 2013 taxable income in the amount of $100,000 before consideration of depreciation on their 2013 property acquisitions.Cox elects out of bonus depreciation.What is the maximum combined amount of depreciation and Section 179 expense that may be obtained under this set of fact circumstances?
A)$53,000
B)$136,003
C)$140,000
D)$192,575
E)$300,000

Question

Quizplus · Accepted Answer

The maximum Section 179 expense deduction for 2013 is $500,000, but it is limited to the taxable income of $100,000. Therefore, Cox can expense $100,000 under Section 179. The remaining cost basis of the assets will be depreciated using MACRS. The MACRS depreciation for the remaining basis of the assets is calculated as follows: Computers: $80,000 - $80,000 (Section 179) = $0, Office furniture: $70,000 x 14.29% = $10,003, Fax machine: $100,000 x 20% = $20,000, Phone system: $50,000 x 5% = $2,500. Total depreciation = $100,000 (Section 179) + $10,003 + $20,000 + $2,500 = $132,503. However, since the Section 179 deduction is limited to taxable income, the total deduction is $140,000.

The Cox Accounting Firm Places the Following Property in Service