Question

Gilbert is the proprietor of a small business. In 2017, the business income, before consideration of any cost recovery or § 179 deduction, is $3,000,000. Gilbert spends $2,500,000 on new seven-year class assets (use half year convention), and elects to take the § 179 deduction on them. He elects not to take additional first-year depreciation. Gilbert's cost recovery deduction for 2017, for 5-year asset purchases, is $780,000.

If an amount is zero, enter "0". If required, round your intermediate computations and final answers to the nearest dollar.

Click here to access the depreciation table to use for this problem.

a. What is the tentative amount of Gilbert's overall § 179 deduction for the seven-year class assets before any income limitation?
$

b. Gilbert's cost recovery amount (excluding any § 179 deduction) for the seven-year class assets is $.

c. The total amount of Gilbert's § 179 deduction for the seven-year class assets after any income limitation is $.

d. Gilbert's total cost recovery depreciation deduction (including any § 179 deduction) is $.

e. What is the amount of any § 179 carryforward?
$

Answer 1

a. The tentative amount of Gilbert's overall § 179 deduction for the seven-year class assets before any income limitation = $500,000

b. Gilbert's cost recovery amount (excluding any § 179 deduction) for the seven-year class assets
= ($2,500,000- $500,000)*14.29%

=$2,000,000* 14.29% = $285,800

c. The total amount of Gilbert's § 179 deduction for the seven-year class assets after any income limitation
Income limitation:
If the cost of your qualifying section 179 property placed in service in a year is more than $2,010,000, you generally must reduce the dollar limit (but not below zero) by the amount of cost over $2,010,000.
That means , here the cost of your section 179 property placed in service during 2017 = $2,500,000
Excess amount = 2,500,000- 2,010,000= $490,000
Then, we need to reduce her dollar limit to = ($500,000 − $490,000) = $10,000
d. Gilbert's total cost recovery depreciation deduction (including any § 179 deduction) is $.
Total cost recovery depreciation deduction = $10,000 + $285,800 = $295,800

e. The carry forward amount = $500,000 - $295,800 = $204,200