On July 17,2016,Elise purchases office furniture (7-year property)costing $50,000 for use in her business.She wishes to use the Section 179 election.Her taxable income before the depreciation deduction is $25,000.What is the maximum total cost recovery deduction Elise can take for the current year?

Question

Quizplus · Accepted Answer

Elise can use the Section 179 election to immediately expense the full cost of the furniture. However, the maximum amount she can expense for 2016 is limited to her taxable income before the depreciation deduction, which is $25,000.

Therefore, Elise can expense $25,000 under Section 179 and take bonus depreciation of 50% on the remaining $25,000. This means she can take a total cost recovery deduction of $25,000 + ($25,000 x 50%) = $37,500.

However, there is also a maximum overall limit of $500,000 for Section 179 expenses in 2016. Since Elise's furniture expense is only $50,000, she is well below this limit and can take the full deduction of $37,500.

Therefore, the maximum total cost recovery deduction Elise can take for the current year is $37,500, making choice D the correct answer.

On July 17,2016,Elise Purchases Office Furniture (7-Year Property)costing $50,000 for Use