Question

Hansen Computer Corp. acquires $2,150,000 in new 7-year class assets (all tangible personal property) in February 2020. The company elects to take all available Sec. 179 expense and bonus first-year depreciation. Assume Hansen uses a calendar year and that Sec. 179 expense will not be limited by taxable income in 2020. What cost recovery deduction can Hansen take in 2020?

Answer 1

Cost recovery deduction can Hansen take in 2020

$            2,150,000

Working:

a	Total of Qualified Assets under Section 179	$            2,150,000
b	Threshold for section 179 in 2020	$            2,590,000
c	Maximum Section 179 expense phase out [a-b][Only if value of qualified asset is more than threshold limit]	$                           -
d	Section 179 Maximum 2020 limit	$            1,040,000
e	Section 179 deduction for 2020 is [d-c]	$            1,040,000
f	Bonus First Year Depreciation [2150000-1040000]	$            1,110,000
	Cost recovery deduction can Hansen take in 2020 [ e+f]	$            2,150,000

Notes:

1) Bonus depreciation can be claimed only after claiming Section 179 deduction.