Solution c 179 deduction 500000 additional 1st year

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Chapter APC / Exercise 7
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Solution:c§ 179 deduction $ 500,000Additional 1stYear Depreciation @ 50%($ 610,000 - 500,000 ) x 50%55,000Regular MACRS [($610,000 – $500,000 - $55,000) .1429]8,574 Total deduction$ 563,574Additional 1stYear Depreciation –limited to new tangible personal property. Deductionknown as bonus depreciation is 50% of acquisition cost less amounts claimed for Section 179. Expired as of 12/31/13.Depreciation & AutosIllustration 1 -On June 1, 2012, Elijah purchased a used automobile that cost $16,000. The car is used 70% for business and 30% for personal use. (Assume this percentage is maintained for the life of the car.) Determine the cost recovery deduction for 2013.a.$3,430.b.$3,570.c.$4,900.d.$5,120.e.None of the above.Solution:aThe cost recovery allowance for 2013:$16,000   x   0.320  x   70%=$ 3,584Acc431 – Introduction to Federal TaxationChapters 6 thru 10 – Lecture ProblemsLast Revised: November 4, 2015Page 58
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Chapter APC / Exercise 7
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But limited to $ 3,570 ($5,100*   x   70%).The cost recovery allowance for 2012:$16,000   x   0.200  x   70%=$ 3,584But limited to $ 2,240 ($3,160*   x   70%).*These “luxury auto” depreciation limits are indexed annually.  Date Placedin ServiceFirst YearSecond YearThird YearFourth & LaterYears2013 $ 3,160$ 5,100$ 3,050$ 1,8752012 $ 3,160$ 5,100$ 3,050$ 1,875pp. 8-15 to 8-17Table 8.1- MACRS Accelerated Depreciation for Personal Property assuming ½ year conventionIllustration 2 -On June 1, 2013, Cassandra places in service a new automobile that cost $25,000. The car is used100% for business. (Assume this percentage is maintained for the life of the car.) Determine the cost recovery deduction for 2013.a.$ 0.b.$ 3,160.c.$ 5,000.d.$ 11,160.e.None of the above.Solution:dThe limit is $11,060 which is calculated as follows:Section 179$          02013 Luxury Auto Depreciation Limit     3,160Acc431 – Introduction to Federal TaxationChapters 6 thru 10 – Lecture ProblemsLast Revised: November 4, 2015Page 59
Additional 1st Year Depreciation @ 50%but limited to $ 8,000     8,000Total$ 11,160  Pages 8-15 & 16Illustration 3 –During 2013, Jay acquires and places into service a new Sports Utility Vehicle (i.e. SUV aka BMW X-5) that cost $70,000 and has a Gross Vehicle Weight (i.e. GVW) of 6,100 pounds. Jay uses the vehicle 100% of the time for business use. The total deduction for 2013 with respect to the SUV is computed as follows:Section 179 – Limited to $25,000$  25,000Additional 1st Year Depreciation – 50%($70,000  -  25,000)  x  50%    22,500Standard MACRS Depreciation(70,000  -  25,000  -  22,500)  x  0.20      4,500 Total$  52,000Note:Special rules apply to vehicles with a gross vehicle weight that exceeds 6,000 pounds but doesn’t exceed 14,000 pounds. Section 179 deduction is limited to $25,000 and the vehicle is subject to 1stYear Additional Depreciation of 50% before taking into account the normal 1styear MACRS deduction of 20% (see Table 1 for 5 year property).See page 8-17Illustration 4 –On June 14, 2012, Derek purchased a new automobile that cost $18,000. The car is used 80% for business and 20% for personal use. In 2013, he used the automobile 30% for business and 70% for personal use. Determine the cost recovery recapture for 2013.

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