The only asset Bill purchased during 2011 was a new seven-year class asset.The asset,which was listed property,was acquired on June 17 at a cost of $50,000.The asset was used 40% for business,30% for the production of income,and the rest of the time for personal use.Bill always elects to expense the maximum amount under § 179 whenever it is applicable.The net income from the business before the § 179 deduction is $100,000.Determine Bill's maximum deduction with respect to the property for 2011.

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Quizplus · Accepted Answer

The maximum deduction is calculated by considering the business use percentage and the applicable depreciation method. Since the asset is used 40% for business, only 40% of the cost is eligible for depreciation. The § 179 deduction is not applicable because the business use is less than 50%. Therefore, the deduction is based on the Modified Accelerated Cost Recovery System (MACRS) for the business use portion, which is $50,000 * 40% * 14.29% (half-year convention for 7-year property) = $2,499.

The Only Asset Bill Purchased During 2011 Was a New