Crouch LLC placed in service on May 19,2017 machinery and equipment (7-year property)with a basis of $2,200,000.Assume that Crouch has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus expensing).(Use MACRS Table 1)
A) $314,380.
B) $340,000.
C) $605,794.
D) $742,930.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

Since the machinery and equipment are classified as 7-year property, they are eligible for MACRS depreciation using Table 1. Using this table, we can determine that the depreciation expense for the first year is 14.29% or $314,380 ($2,200,000 x 14.29%).

In addition, Crouch can choose to use §179 expensing, which allows for an immediate deduction of a portion of the cost of qualifying property. For 2017, the maximum §179 expense deduction is $510,000. Since the basis of the machinery and equipment is $2,200,000, Crouch can choose to expense up to $510,000 and depreciate the remaining $1,690,000 over 7 years using MACRS.

Therefore, the maximum depreciation expense for the first year is the sum of the §179 expensing and the MACRS depreciation, which is $605,794 ($314,380 + $291,414).

Crouch LLC Placed in Service on May 19,2017 Machinery and Equipment