Terra Corporation,a calendar-year taxpayer,purchases and places into service machinery with a 7-year life that cost $518,000.The mid-quarter convention does not apply,and the property is not eligible for bonus depreciation.Terra elects to depreciate the maximum under Sec.179.Terra's taxable income for the year before the Sec.179 deduction is $700,000.What is Terra's total depreciation deduction related to this property?

Question

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Since Terra elects to depreciate the maximum under Sec.179, the total amount of the deduction is $500,000. However, the remaining basis of the property is subject to regular depreciation. Using the MACRS 7-year depreciation method, the annual depreciation is $74,022. Therefore, the total depreciation deduction is $500,000 + $74,022 = $502,572. Option D is the closest answer.

Terra Corporation,a Calendar-Year Taxpayer,purchases and Places into Service Machinery with a 7-Year