Augie purchased one new asset during the year (five-year property) on November 10, 2012, at a cost of $450,000. She made the § 179 election.The income from the business before the cost recovery deduction and the § 179 deduction was $310,000.She takes additional first-year depreciation. Determine the total cost recovery deduction with respect to the asset for 2012.
A)$22,500.
B)$154,550.
C)$302,275.
D)$310,000.
E)None of the above.

Question

Quizplus · Accepted Answer

The § 179 deduction is limited to the business income of $310,000. Augie can deduct $310,000 under § 179. The remaining $140,000 ($450,000 - $310,000) is eligible for 50% bonus depreciation, which is $70,000. The total cost recovery deduction is $310,000 (Section 179) + $70,000 (bonus depreciation) = $380,000. However, the deduction cannot exceed the cost of the asset, so the total deduction is $450,000.

Augie Purchased One New Asset During the Year (Five-Year Property)