In May 2014, Preston purchases 5-year MACRS property costing $150,000 and 7-year MACRS property costing $60,000. Preston's income is $100,000. If Preston wishes to maximize his total 2013 cost recovery deduction, what will his total cost recovery deduction be on the properties purchased in 2014?
A) $100,000
B) $ 30,430
C) $ 51,430
D) $ 42,000
E) $ 34,430

Question

Quizplus · Accepted Answer

Preston can use Section 179 to expense up to $25,000 of the cost of the property, and then apply MACRS depreciation. For 5-year property, the MACRS rate is 20% for the first year, and for 7-year property, it is 14.29%. Calculating these gives a total deduction of $51,430.

In May 2014, Preston Purchases 5-Year MACRS Property Costing $150,000