Clay LLC placed in service machinery and equipment (7-year property) with a basis of $3,450,000 on June 6, 2018. Assume that Clay has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignoring any possible bonus depreciation.) (Use MACRS Table 1) (Round final answer to the nearest whole number.)
A) $690,000.
B) $493,005.
C) $485,860.
D) $535,860.
E) None of the choices are correct.

Question

Clay LLC placed in service machinery and equipment (7-year property) with a basis of $3,450,000 on June 6, 2018. Assume that Clay has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignoring any possible bonus depreciation.) (Use MACRS Table 1) (Round final answer to the nearest whole number.) 
A) $690,000.
B) $493,005.
C) $485,860.
D) $535,860.
E) None of the choices are correct.

Quizplus · Accepted Answer

The $1,000,000 §179 expense is reduced to $50,000 because of the property placed in service limitation ($3,450,000 − $2,500,000 threshold). The half-year convention applies. The expense is $535,860 which is depreciation of $3,400,000 × 0.1429 = $485,860 plus $50,000 of §179 expense.

Clay LLC Placed in Service Machinery and Equipment (7-Year Property)