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Ch 6 Learning Activity

Betsy acquired a new network system on June 5, 2019 (5-year class property), for $75,000. She expects taxable income from the business will always be about $175,000 without regard to the §179 election. Betsy will elect §179 expensing. She also acquired 7-year property in July 2019 for $350,000.

Determine Betsy’s maximum cost recovery deduction with respect to her purchases in 2019:


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Answer #1

Section 179 can be taken up to $1,020,000 up to the income limitation. A 100% bonus is allowed as well. Section 179 would be limited to $175,000, but the rest would be allowed with the 100% bonus.
7- year Property Section 179 $175,000
100% Bonus ($350,000 - $175,000) 175,000

5- year Property 100% Bonus ($75,000 x 100%) 75,000
Total Cost Recovery $425,000

answered by: gavin
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