Acorn Construction (calendar-year-end C-corporation) has had rapid expansion dur

Question

Acorn Construction (calendar-year-end C-corporation) has had rapid expansion during the last half of the current year due to the housing market's recovery. The company has record income and would like to maximize its cost recovery deduction for the current year. Acorn provided you with the following information: Asset Placed in Service Basis New equipment and tools Used light duty trucks Used machinery Total August 20 October 17 November 6 $ 800,000 1,500,000 25,00 $2,825,000 a) What is Acorn's maximum cost recovery deduction in the current year?

Explanation / Answer

Solution:-

Calculation of Acron's maximum cost recovery deduction:-

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Asset Original basis Bonus Depr Remaning basis MARCS Rate Depreciation expenses New equipment and tools (7-year) 800,000 400,000 400,000 10.71% 42,840 Used light duty trucks (5-year) 1,500,000 0 1,500,000 5% 75,000 Used machinery (7-year) 525,000 0 525,000 3.57% 18,743 Bonus depreciation 400,000 Maximum cost recovery $ 536,583

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