Question

Rex's Wrecks purchased $1,650,000 in new equipment (7 year property) during 2019. Rex wants to use Section 179 to expense the maximum amount of the purchase. Assuming no limitations due to net income restrictions, Rex can expense $(1) under Sec. 179, $(2) in bonus depreciation, and $(3) in regular MACRS depreciation (rounded to the nearest dollar).

a. $1,650,000; $0; $0
b. $500,000; $1,000,000; $150,000
c. $1,050,000; $500,000; $100,000
d. $1,000,000; $650,000; $0

Answer 1

Rex's Wrecks can expense $1,000,000 under Section 179, $1,650,000 in bonus depreciation, and $235,935 in regular MACRS depreciation.

Step-by-step explanation:

To calculate the amount that can be expensed under Section 179, we need to determine the maximum deduction limit for the year. In 2019, the maximum deduction limit for Section 179 is $1,000,000. Since Rex's Wrecks purchased $1,650,000 in new equipment, we can expense up to the maximum limit of $1,000,000.

For bonus depreciation, in 2019, the bonus depreciation rate is 100% of the cost of qualified property. Since we purchased $1,650,000 in new equipment, we can expense the full amount of $1,650,000.

For regular MACRS depreciation, the property is classified as 7-year property. Using the MACRS depreciation schedule, the depreciation percentage for year 1 is 14.29%. Therefore, we can expense $235,935 (14.29% of $1,650,000) for regular MACRS depreciation.