Question

Problem 8-42 (a) (LO. 2, 3) Dorcas is the proprietor of a small business. In 2019, the business income, before consideration of any cost recovery or 5 179 deduction, is $170,000. Dorcas spends $50,000 on new seven-year dass assets and elects to take the 5 179 deduction on them. She elects not to take additional first-year depreciation. Dorcas's cost recovery deduction for 2019, for 5-year assets (not purchased this year), is $90,000. 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 Dorcas's overall 5 179 deduction for the seven-year dass assets before any income limitation? b. Dorcas's cost recovery amount (excluding any 5 179 deduction) for the seven-year class assets is $ C. The total amount of Dorcas's 5 179 deduction for the seven-year class assets after any income limitation is $ d. Dorcas's total cost recovery depreciation deduction (including any 5 179 deduction) is $ e. What is the amount of any 5 179 carryforward?

Answer 1

Part A

$50000

The maximum Section 179 deduction is equal to asset value (up to $1000000)

Part B

$0

Cost recovery for 7-year class assets[($50,000 − $1000000) × .1429] = $0

Part C

$120000

Income limitation
Income before § 179 and cost recovery	170000
Cost recovery ($95,000 + $14,290)	50000
§ 179 deduction for the seven-year class after any income limitation	$120000

Part D

$120000

§ 179 deduction for the seven-year class after any income limitation	$120000
Cost recovery for 7-year class assets	0
Total	$120000

Part E

$880000

1000000-120000 = $880000

Dear Student,

If any doubts, then feel free to ask.