Question

On May 31, 2017, Javier Sanchez purchased and placed in service a 7-year class asset costing $698,000 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC).

Compute the maximum deductions (including first year additional depreciation) that Javier Sanchez can claim with respect to this asset in 2017 and 2018.

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.

The maximum § 179 for 2017 is $510,000 and the reduction threshold is $2,030,000.

a. Javier Sanchez's total cost recovery deduction in 2017 is $ and $ in 2018 .

b. Complete Javier's Form 4562 (page 1) for 2017. If an amount is zero, enter "0". Enter amounts as positive numbers.

Form 4562 Department of the Treasury Internal Revenue Service (99) Depreciation and Amortization (Including Information on Listed Property) ▶ Attach to your tax return. ▶ Information about Form 4562 and its separate instructions is at www.irs.gov/form4562. OMB No. 1545-0172 2017 Attachment Sequence No. 179 Name(s) shown on return Javier Sanchez Business or activity to which this form relates Sanchez Landscaping, LLC Identifying number 123-45-6789 Part I Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I. 1 Maximum amount (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2 Total cost of section 179 property placed in service (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 Threshold cost of section 179 property before reduction in limitation (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . 3 4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing separately, see instructions 5 6 (a) Description of property (b) Cost (business use only) (c) Elected cost Landscaping equipment 7 Listed property. Enter the amount from line 29 . . . . . . . . . . . . . . . . . . . . . . . . . 7 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 Tentative deduction. Enter the smaller of line 5 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 10 Carryover of disallowed deduction from line 13 of your 2016 Form 4562 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions) . . . . . . . 11 12 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Carryover of disallowed deduction to 2018. Add lines 9 and 10, less line 12 . . . . . ▶ 13 Note: Don't use Part II or Part III below for listed property. Instead, use Part V. Part II Special Depreciation Allowance and Other Depreciation (Don't include listed property.) (See instructions.) 14 Special depreciation allowance for qualified property (other than listed property) placed in service during the tax year (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 Property subject to section 168(f)(1) election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 16 Other depreciation (including ACRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Part III MACRS Depreciation (Don't include listed property.) (See instructions.) Section A 17 MACRS deductions for assets placed in service in tax years beginning before 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 18 If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here ▶ ☐ Section B—Assets Placed in Service During 2017 Tax Year Using the General Depreciation System (a) Classification of property (b) Month and year placed in service (c) Basis for depreciation (business/investment use only—see instructions) (d)Recovery period (e) Convention (f) Method (g) Depreciation deduction 19a 3-year property b 5-year property c 7-year property 7 yrs. d 10-year property e 15-year property f 20-year property g 25-year property 25 yrs. S/L h Residential rental 27.5 yrs. MM S/L property 27.5 yrs. MM S/L i Nonresidential real 39 yrs. MM S/L property MM S/L Section C—Assets Placed in Service During 2017 Tax Year Using the Alternative Depreciation System 20a Class life S/L b 12-year 12 yrs. S/L c 40-year 40 yrs. MM S/L Part IV Summary (See instructions.) 21 Listed property. Enter amount from line 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 22 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. Enter here and on the appropriate lines of your return. Partnerships and S corporations—see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Answer 1

Question 1: Solution

Asset-	Landscaping equipment
Cost-	698,000
Placed In service/Acquired date	May 31, 2017
Estimated Tax life	7 Years
Convention	Half year convention

The asset is placed in service during the year 2017 and the fixed asset is eligible for 50% bonus depreciation expense for US Tax purpose since asset is placed in service before September 27, 2017 and half year convention apply. Hence, company will deduct the depreciation expense of $617,433 on 2017 federal tax return and $23,021 on 2018 federal tax return for this asset. Please find below detail calculations.

Allowable 179 Deduction for 2017 (assuming company generates taxable income else no 179 deduction)	510,000
Remaining Basis (cost- 179)	188,000
Allowable bonus depreciation 50% (asset PIS before Sep.28, 2019)	94,000
Depreciable basis	94,000

Year	MACRS %	MACRS Depreciation allowance (for US Tax Purpose)	Total Depreciation Deduction (179+bonus+ MACRS Depreciation)
2017	14.29%	13,433	617,433
2018	24.49%	23,021	23,021

Question 2- Solution

Please update numbers per below on form 4562 and rest of the lines that are not listed below with zero's.

Part1-
Line1	510,000
Line 2	698,000
Line 3	2,030,000
Line 6
b	698,000
c	510,000
Line 8	510,000
Line 9	510,000
Line 11	510,000
Line 12	510,000
Part II
Line 14	94,000
Part III
Section B
Line19c
(b)	05/31/2017
( c)	94,000
(d)	7
( e)	HY
(f)	200DB
(g)	13,433
Part IV
Line 22	617,433