Lunar Corporation purchased and placed in service new five-year MACRS equipment costing $700,000 on January 5,2013.Lunar is the original user of this equipment.Assume Lunar had no other additions this year,has high taxable income and wishes to maximize the 2013 total cost recovery deduction.How much can it deduct this year?

Question

Quizplus · Accepted Answer

Lunar Corporation can take advantage of the Section 179 deduction and bonus depreciation. For 2013, the Section 179 limit was $500,000, and the bonus depreciation was 50%. Therefore, they can deduct $500,000 under Section 179 and 50% of the remaining $200,000 ($100,000) as bonus depreciation, totaling $600,000. Additionally, they can take the MACRS depreciation on the remaining $100,000, which is 20% for the first year, adding $20,000. Thus, the total deduction is $620,000.

Lunar Corporation Purchased and Placed in Service New Five-Year MACRS