Littman LLC placed in service on July 29, 2015 machinery and equipment (7-year p

Question

Littman LLC placed in service on July 29, 2015 machinery and equipment (7-year property) with a basis of $600,000. Littman's income for the current year before any depreciation expense was $100,000. Which of the following statements is true to maximize Littman's total depreciation expense for 2015? (Assume that the 2014 §179 limits are extended to 2015.)

a. Littman should take §179 expense equal to the maximum $500,000.

b. Littman should take no §179 expense.

C. Littmen's §179 expense will be less than $100,000.

D. None of these.

Explanation / Answer

The true statement to maximize Littman's total depreciation expense for 2015 is ,

C. Littmen's §179 expense will be less than $100,000.

Reason:

The $500,000 §179 expense is limited to income after regular MACRS depreciation but before §179 expense. The $100,000 income amount is before any cost recovery. Thus to maximize its cost recovery, Littman should take $16,637 of §179 expense. Littman's regular MACRS amount will be $83,363 for a total of $100,000 of cost recovery.

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