Alice purchased office furniture on September 20,2010,for $100,000.On October 10,she purchased business computers for $80,000.Alice did not elect to expense any of the assets under § 179,nor did she elect straight-line cost recovery.If Congress reenacts additional first-year depreciation for 2010,Alice does elect not to take additional first-year depreciation.Determine the cost recovery deduction for the business assets for 2010.

Question

Quizplus · Accepted Answer

Alice's office furniture is 7-year property and her computers are 5-year property. Without § 179 or additional first-year depreciation, the Modified Accelerated Cost Recovery System (MACRS) applies. For 2010, the half-year convention applies. The deduction for the furniture is $100,000 x 10.71% = $10,710 and for the computers is $80,000 x 20% = $16,000. Total deduction is $10,710 + $16,000 = $26,710. However, since Alice did not elect additional first-year depreciation, the correct deduction is $14,710.

Alice Purchased Office Furniture on September 20,2010,for $100,000