Mary purchased a new five-year class asset on March 7,2016.The asset was listed property (not an automobile).It was used 60% for business and the rest of the time for personal use.The asset cost $900,000.Mary made the § 179 election.The income from the business before the § 179 deduction was $600,000.Mary also takes additional first-year depreciation (if available).Determine the total deductions with respect to the asset for 2016.
A)$72,000
B)$271,600
C)$524,000
D)$600,000
E)None of the above

Question

Quizplus · Accepted Answer

Mary can take a § 179 deduction up to the business income limit of $600,000, but only 60% of the asset's cost ($540,000) is eligible due to business use. She can deduct $540,000 under § 179. The remaining basis for depreciation is $360,000. For listed property used more than 50% for business, she can take additional first-year bonus depreciation on the business portion, which is 50% of $360,000, equaling $180,000. The total deduction is $540,000 (Section 179) + $180,000 (bonus depreciation) = $720,000. However, the deduction is limited to the business income of $600,000. Thus, the total deduction is $600,000.

Mary Purchased a New Five-Year Class Asset on March 7,2016