Mary purchased a new five-year class asset on March 7, 2017. 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. Determine the total deductions with respect to the asset for 2017.
A)$180,000
B)$378,000
C)$528,000
D)$600,000
E)None of the above

Question

Quizplus · Accepted Answer

First, we need to determine the maximum amount that can be deducted under §179. Since the asset cost $900,000, the §179 deduction limit would be $510,000 (assuming the maximum limit of $1,010,000 for 2017).

Next, we need to determine the business use percentage to calculate the total business deduction. The asset was used 60% for business, so the total §179 deduction would be $306,000 (60% of $510,000).

Mary can also take additional first-year depreciation of 50% of the remaining cost ($900,000 - $510,000 = $390,000) which is $195,000.

Therefore, Mary's total deduction for 2017 would be $306,000 (§179 deduction) + $195,000 (additional first-year depreciation) = $501,000.

Note that the income from the business before the §179 deduction ($600,000) is not relevant to the calculation of total deductions.

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