Question

Marian purchased one new asset during the year (five-year property) on November 10, 2015, at a cost of 100,000. She made the § 179 election. The income from the business before the cost recovery deduction and the § 179 deduction was50,000. She does not take additional first-year depreciation. Determine the total cost recovery deduction with respect to the asset for 2015.

1) $20,000
2) $28,750
3) $25,000
4) $5,000
5) $40,000

Answer 1

The total cost recovery deduction with respect to the asset for 2015 is $25,000.

Step-by-step explanation:

The total cost recovery deduction with respect to the asset for 2015 can be calculated by applying the § 179 deduction. The § 179 deduction allows businesses to deduct the cost of qualifying property in the year it is placed in service, rather than depreciating it over time. In this case, the cost of the asset is $100,000, and the § 179 deduction limit is $25,000. Since Marian made the § 179 election, she can deduct up to $25,000 of the asset's cost in 2015. Therefore, the total cost recovery deduction for 2015 is $25,000.