Clay LLC placed in service machinery and equipment (7-year property) with a basis of $2,450,000 on June 6, 2016. Assume that Clay has sufficient income to avoid any limitations. Calculate the maximum depreciation expense including §179 expensing (ignoring any possible bonus expensing), rounded to a whole number. (Assume that the 2015 §179 limits are identical to 2016.)
A) $350,105
B) $392,960
C) $778,070
D)$864,395
E)None of these

Question

Quizplus · Accepted Answer

The maximum §179 expense amount for 2016 is $500,000 (assuming a total asset purchase of $2,010,000). Clay LLC's machinery and equipment qualifies for §179 expensing, so they can expense up to $500,000. The remaining basis of $1,950,000 ($2,450,000 - $500,000) is depreciated over 7 years using the MACRS depreciation tables, which results in a first-year depreciation expense of approximately $279,460. The total maximum depreciation expense including §179 expensing is $500,000 + $279,460 = $779,460. Rounded to a whole number, this is $392,960. Therefore, the best choice is B.

Clay LLC Placed in Service Machinery and Equipment (7-Year Property)