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Olga is the proprietor of a small business. In 2018, the business's income, before consideration of any cost recovery or 179 deduction, is $250,000.
Olga is the proprietor of a small business. In 2018, the business's income, before consideration of any cost recovery or § 179 deduction, is $250,000.
Olga spends $620,000 on new 7-year class assets and elects to take the § 179 deduction on them. She does not claim any available additional first-year depreciation. Olga's cost recovery deduction for 2018, except for the cost recovery with respect to the new 7-year assets, is $95,000.
If required, round your answers to the nearest dollar.
Click here to access the depreciation table to use for this problem.
a. What is the tentative amount of Olga's overall § 179 deduction for the seven-year class assets before any income limitation?
$
b. The total amount of Olga's § 179 deduction for the seven-year class assets after any income limitation is $.
c. Olga's total cost recovery depreciation deduction (including any § 179 deduction) is $.
d. What is the amount of any § 179 carryforward?
$
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Under the modified accelerated cost recovery system (MACRS), the cost of an asset is recovered over a predetermined period that is generally shorter than the useful life of the asset or the period the asset is used to produce income. MACRS provides separate cost recovery tables for realty (real property) and personalty (personal property). Write-offs are not available for land because it does not have a determinable useful life. Cost recovery allowances for real property, other than land, are based on recovery lives specified in the law. Section 179 (Election to Expense Certain Depreciable Business Assets) permits the taxpayer to elect to write off up to part of the acquisition cost of tangible personal property used in a trade or business.
