Question

Problem 4 Scott purchased 3 assets for his business in 2017. He purchased a new 3-year asset for $40,000 on January 21, 2017. He purchased a new 5-year asset for $800,000 on May 20, 2017, and he purchased a warehouse for $2,000,000 on October 20, 2017. Assuming his taxable income before Section 179 expense is $700,000, calculate Scott's total cost recovery deduction for 2017. Scott's total cost recovery deduction for 2017:

Answer 1

Answer :

Only the following assets are eligible to deduct under section 179

1.	3 year asset	$40,000
2.	5 year asset	$800,000
	Total eligible investment	$840,000

Note : Investment on warehouse $2,000,000 is not eligible for deduction under section 179

Total deduction under section 179 is limited upto $500,000 Here,Scott can deduct $500,000 only out of $840,000 investment from his $700,000 business income for the 2015

Limitation of section 179 : Maximum investment is $2,000,000 Maximum deduction $500,000 Assets should be kept in use for minimum 50% of time.