System 200% or 150% Declining Balance Switching to Straight-Line* Half-Year Conv
ID: 2569620 • Letter: S
Question
System 200% or 150% Declining Balance Switching to Straight-Line*
Half-Year Convention
Recovery Year
1 2 3 4 5 6 7 8 9
3-Year
33.33 44.45 14.81
7.41
5-Year
20.00 32.00 19.20 11.52 11.52
5.76
7-Year
14.29 24.49 17.49 12.49
8.93 8.92 8.93 4.46
10-Year
10.00 18.00 14.40 11.52
9.22 7.37 6.55 6.55 6.56 6.55 3.28
15-Year
5.00 9.50 8.55 7.70 6.93 6.23 5.90 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95
20-Year
3.750 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231
Betsy acquired a new network system on June 5, 2016 (5-year class property), for $54,000. She expects taxable income from the business will always be about $140,000 without regard to the §179 election. Betsy will elect §179 expensing. She also acquired 7-year property in July 2016 for $280,000. Determine Betsy’s maximum cost recovery deduction with respect to her purchases in 2016:
Explanation / Answer
section 179 can be taken up to $500,000 upto the income limitation and also 50% bonus is allowed
7-year property
section 179 = 140000
50% bonus (280000-140000)*50% = 70000
MACRS (70000*14.29%) = 10003
5-year propery = 50% bonus 54000*50% = 27000
MACRS (27000*20%) = 54000
Total cost recovery = 301003
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