Carolyn purchases a new delivery truck (5-year MACRS property)costing $508,000 for use in her floral business on January 5,2016.If Carolyn's taxable income from the floral business before any special elections is $8,000 for 2016,what is her maximum allowable cost recovery on the delivery truck in 2016?

Question

Quizplus · Accepted Answer

The maximum allowable cost recovery for the delivery truck can be calculated using the MACRS depreciation table. The table indicates that the 5-year property is assigned a depreciation percentage of 20.00% for Year 1. Therefore, Carolyn's maximum allowable cost recovery for the delivery truck in 2016 is $508,000 x 20.00% = $101,600. However, since her taxable income before any special elections is only $8,000, Carolyn can only deduct up to that amount. Therefore, the correct answer is C) $108,000, which is the closest option to $101,600 that does not exceed her taxable income.

Carolyn Purchases a New Delivery Truck (5-Year MACRS Property)costing $508,000