Question

Augie purchased one new asset during the year (five-year property) on November 10, 2019, at a cost of $660,000. She would like to use the § 179 election and will also take additional first-year depreciation. The income from the business before the cost recovery deduction and the § 179 deduction was $600,000. Determine the maximum cost recovery deduction available on this asset for 2019.

Answer 1

The maximum cost recovery deduction for Augie's new asset in 2019 is $1,040,000.

Step-by-step explanation:

1. Section 179 Deduction:

Augie can use the § 179 election to deduct up to $1,040,000 of the asset's cost in the year of purchase (2019).

This limit applies to qualified business property, which the new asset likely qualifies as.

2. Additional First-Year Depreciation:

Augie can also take additional first-year depreciation under the Modified Accelerated Cost Recovery System (MACRS).

The depreciation deduction for the first year depends on the asset class, but it typically ranges from 20% to 30%.

Combining the Deductions:

Augie can claim the full § 179 deduction of $1,040,000, even if it exceeds the asset's cost.

This deduction will reduce her taxable income for 2019.

She can also claim any additional first-year depreciation allowed by MACRS.

Answer 2

$600,000

Step-by-step explanation:

adquisition 660,000

but income for the period is 600,000

According to the law, you can only deduct as far as it does not exceed the taxable income

AKA until making the net income equal to zero.

You can generate an income tax benefit for using the § 179

The remaining 60,000 can be carry-over to next year if the requirement is met.