Littman LLC placed in service on July 29, 2020, machinery and equipment (seven-year property) with a basis of $600,000. Littman's income for the current year before any depreciation deduction was $100,000. Which of the following statements is true to maximize Littman's total depreciation deduction for 2020?

Question

Quizplus · Accepted Answer

To maximize Littman's total depreciation deduction for 2020, Littman should take the §179 expense equal to the remaining amount of the property's cost after subtracting the seven-year depreciation deduction. The seven-year depreciation deduction is calculated as $85,714 ($600,000/7), leaving $514,286 ($600,000-$85,714) to apply toward the §179 expense deduction. Since the maximum §179 expense deduction for 2020 is $1,040,000, Littman can take the full amount of $514,286. Therefore, Littman's §179 expense will be greater than $100,000.

Littman LLC Placed in Service on July 29, 2020, Machinery