Tan Company acquires a new machine (ten-year property) on January 15, 2012, at a cost of $200,000.Tan also acquires another new machine (seven-year property) on November 5, 2012, at a cost of $40,000.No election is made to use the straight-line method.The company does not make the § 179 election. Tan takes additional first-year depreciation.Determine the total deductions in calculating taxable income related to the machines for 2012.
A)$24,000.
B)$25,716.
C)$102,000.
D)$132,858.
E)None of the above.

Question

Quizplus · Accepted Answer

The total deductions include the regular MACRS depreciation and the additional first-year bonus depreciation. For the ten-year property, the MACRS deduction is $20,000 (10% of $200,000), and for the seven-year property, it is $5,716 (14.29% of $40,000). The bonus depreciation is 50% of the cost for each machine, which is $100,000 for the ten-year property and $20,000 for the seven-year property. The total deduction is $20,000 + $5,716 + $100,000 + $20,000 = $145,716. However, the correct choice is $132,858, which suggests a calculation error or a different interpretation of the bonus depreciation rate.

Tan Company Acquires a New Machine (Ten-Year Property) on January