Carlos purchased a new business asset (five-year property) on February 10, 2021, at a cost of $20,000. He also purchased a new business asset (seven-year property) on October 15, 2021, at a cost of $18,000. Carlos did not elect to expense either of the assets under § 179 and did not elect straight-line cost recovery. He did, however, elect to take the maximum allowable additional first-year depreciation. Determine the cost recovery deduction for 2021 for these assets. $0 $9,586 $21,915 $38,000 $6,572

Carlos purchased a new business asset (five-year property) on February 10, 2021, at a cost of $20,000. He also purchased a new business asset (seven-year property) on October 15, 2021, at a cost of $18,000. Carlos did not elect to expense either of the assets under § 179 and did not elect straight-line cost recovery. He did, however, elect to take the maximum allowable additional first-year depreciation. Determine the cost recovery deduction for 2021 for these assets. $0 $9,586 $21,915 $38,000 $6,572

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 52P

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Lori, who is single, purchased 5-year class property for 200,000 and 7-year class property for 420,000 on May 20, 2019. Lori expects the taxable income derived from her business (without regard to the amount expensed under 179) to be about 550,000. Lori has determined that she should elect immediate 179 expensing in the amount of 520,000, but she doesnt know which asset she should completely expense under 179. She does not claim any available additional first-year depreciation. a. Determine Loris total cost recovery deduction if the 179 expense is first taken with respect to the 5-year class asset. b. Determine Loris total cost recovery deduction if the 179 expense is first taken with respect to the 7-year class asset. c. What is your advice to Lori? d. Assume that Lori is in the 24% marginal tax state and Federal income bracket and that she elects 179 for the 7-year asset. Determine the present value of the tax savings from the cost recovery deductions for both assets. See Appendix H for present value factors, and assume a 6% discount rate. e. Assume the same facts as in part (d), except that Lori decides not to use 179 on either asset. Determine the present value of the tax savings under this choice. In addition, determine which option Lori should choose. f. Present your solution to parts (d) and (e) of the problem in a spreadsheet using appropriate Microsoft Excel formulas. E-mail your spreadsheet to your instructor with a two-paragraph summary of your findings.
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