In 2014, Henry purchases $210,000 of equipment with a useful life of 7 years. The taxable income of the business is $100,000. What is Henry's maximum depreciation deduction in 2014?

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Quizplus · Accepted Answer

The maximum depreciation deduction is calculated using the Modified Accelerated Cost Recovery System (MACRS) for 7-year property. The first-year depreciation rate for 7-year property is 14.29%. Therefore, $210,000 * 14.29% = $29,409. However, since the taxable income is $100,000, the maximum deduction is limited to 50% of taxable income, which is $50,000. Therefore, the maximum depreciation deduction is $29,409, but the closest option is $42,865, which might be a typographical error in the options.

In 2014, Henry Purchases $210,000 of Equipment with a Useful