Question

Sid bought a new $1,310,000 seven-year class asset on August 2, 2017. On December 2, 2017, he purchased $800,000 of used five-year class assets. If Sid elects § 179 and takes additional first-year depreciation, what is the maximum cost recovery deduction for these purchases for 2017?

Answer 1

As per Sec 179, The limit in the year 2017 is $ 5 00,000 with the threshold limit of total equipment to be $ 2,000,000

§ 179 expense [$500,000 – ($2,070,000 – $2,000,000)]	$430,000
Taking § 179 expense on 7-year property:
7-year property
§ 179 expense	$  430,000
Additional first-year depreciation [($1,310,000 – $430,000)x 0.50]	440,000
MACRS cost recovery ($440,000x0.1429)	62,876
5-year property
MACRS cost recovery ($800,000x0.20)	160,000
Total deduction	$1,092,876
Taking § 179 expense on 5-year property:
7-year property
Additional first-year depreciation ($1,310,000x0.50)	$  655,000
MACRS cost recovery ($655,000x0.1429)	$ 93599.50
5-year property
§ 179 expense	430,000
MACRS cost recovery [($800,000 – $430,000)x.20]	74,000
Total deduction	$1,252,599.50

Using § 179 on the used 5-year asset produces the greater total deduction in 2017.