Crouch LLC placed in service on May 19, 2016 machinery and equipment (7-year property) with a basis of $2,200,000. Assume that Crouch has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus expensing). (Assume that the 2015 §179 limits are identical to 2016.)
A) $314,380.
B) $440,000.
C) $571,510.
D)$742,930.
E)None of these

Question

Quizplus · Accepted Answer

The maximum §179 expense for property placed in service in 2016 is $500,000. Therefore, Crouch can expense $500,000 of the machinery and equipment cost. The remaining $1,700,000 ($2,200,000 - $500,000) must be depreciated over 7 years using the MACRS depreciation schedule. Using the half-year convention, the first-year depreciation rate for 7-year property is 14.29%. Therefore, the maximum depreciation expense for 2016 is:
($1,700,000 × 14.29%) + $500,000 §179 expense = $571,510.

Crouch LLC Placed in Service on May 19, 2016 Machinery