Augie purchased one new asset during the year (five-year property) on November 10, 2017, at a cost of $660,000. She would like to use the § 179 election and will also take additional first-year depreciation. The income from the business before the cost recovery deduction and the § 179 deduction was $600,000. Determine the total cost recovery deduction with respect to the asset for 2017.
A)$30,500
B)$320,250
C)$510,000
D)$588,750
E)None of the above

Question

Quizplus · Accepted Answer

The total cost of the asset after the § 179 election is $510,000 ($660,000 - $150,000). The additional first-year depreciation is calculated as follows:

$510,000 × 50% × 2/12 = $42,500

Therefore, the total cost recovery deduction is:

§ 179 deduction = $150,000
Additional first-year depreciation = $42,500
Regular MACRS depreciation = $395,250 ($660,000 - $150,000 - $42,500) × 20% = $79,050 in 2017
Total cost recovery deduction = $271,550 + $79,050 = $588,750.

So, the correct answer is (D).

Augie Purchased One New Asset During the Year (Five-Year Property)