The only asset Bill purchased during 2010 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 2010.
A)$1,428.
B)$2,499.
C)$26,749.
D)$33,375.
E)None of the above.

Question

Quizplus · Accepted Answer

The asset is used 70% for business and income production (40% + 30%). Since it is listed property and not used more than 50% for business, it does not qualify for the § 179 deduction. Therefore, Bill can only take MACRS depreciation. The MACRS rate for a 7-year property in the first year is 14.29%. The depreciable basis is $50,000 x 70% = $35,000. The depreciation deduction is $35,000 x 14.29% = $4,999. However, since only 40% is for business, the deductible amount is $4,999 x 40% = $1,999. The closest option is $2,499, which accounts for the business use percentage.

The Only Asset Bill Purchased During 2010 Was a New