In May 2017,Preston purchases 5-year MACRS property costing $150,000 and 7-year MACRS property costing $60,000.Preston's income is $100,000.If Preston wishes to maximize his total 2017 cost recovery deduction,what will his total cost recovery deduction be on the properties purchased in 2017?

Question

Quizplus · Accepted Answer

First, we need to calculate the depreciation for each property using MACRS:

- 5-year property: $150,000 * 20% = $30,000
- 7-year property: $60,000 * 14.29% = $8,574

Next, we need to calculate the total depreciation for the year using the half-year convention (since the properties were purchased in May):

- 5-year property: $30,000 * 0.5 = $15,000
- 7-year property: $8,574 * 0.5 = $4,287

Finally, we can add up the total depreciation for the year:

- $15,000 + $4,287 = $19,287

Therefore, the total cost recovery deduction for Preston in 2017 is $19,287. This option is not among the answer choices. However, if we assume that "total cost recovery deduction" means the sum of the depreciation for both properties, then the answer would be:

- $30,000 + $8,574 = $38,574

This is the closest answer choice and the best option.

In May 2017,Preston Purchases 5-Year MACRS Property Costing $150,000 and 7-Year