Lenter LLC placed in service on April 29,2017 machinery and equipment (7-year property)with a basis of $600,000.Assume that Lenter has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including section 179 expensing (but ignoring bonus expensing).(Use MACRS Table 1)
A) $85,740.
B) $120,000.
C) $522,861.
D) $585,740.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

Since the machinery and equipment are 7-year property, they qualify for the MACRS depreciation method using Table 1.

The maximum depreciation expense in the first year will include the Section 179 deduction as well. For 2017, the maximum Section 179 deduction is $510,000. However, since the cost of the property is $600,000, the maximum Section 179 deduction will be limited to $510,000.

Using MACRS Table 1, the depreciation percentage for 7-year property placed in service in 2017 is 14.29%. So, the maximum depreciation expense in the first year will be:

$510,000 (Section 179) + $600,000 x 14.29% = $522,861

Therefore, the correct answer is C.

Lenter LLC Placed in Service on April 29,2017 Machinery and Equipment