8-42 Olga is the proprietor of a small business. In 2017, the business’s income,
ID: 2611705 • Letter: 8
Question
8-42 Olga is the proprietor of a small business. In 2017, the business’s income, before consideration of any cost recovery or § 179 deduction, is $250,000. Olga spends $610,000 on new 7-year class assets and elects to take the § 179 deduction on them. She does not claim any available additional first-year deprecia- tion. Olga’s cost recovery deduction for 2017, except for the cost recovery with respect to the new 7-year assets, is $95,000. Determine Olga’s total cost recovery with respect to the 7-year class assets and the amount of any § 179 carryforward.
Section 179 Limit:
Cost Recovery for 7 year class asset:
Income before section 179 and cost recovery:
Cost Recovery:
Income before section 179:
Section 179 allowed amount:
Total deduction with respect to 7 year assets:
Section 179 carryforward (if applicable):
8-42 Olga is the proprietor of a small business. In 2017, the business’s income, before consideration of any cost recovery or § 179 deduction, is $250,000. Olga spends $610,000 on new 7-year class assets and elects to take the § 179 deduction on them. She does not claim any available additional first-year deprecia- tion. Olga’s cost recovery deduction for 2017, except for the cost recovery with respect to the new 7-year assets, is $95,000. Determine Olga’s total cost recovery with respect to the 7-year class assets and the amount of any § 179 carryforward.
Section 179 Limit:
Cost Recovery for 7 year class asset:
Income before section 179 and cost recovery:
Cost Recovery:
Income before section 179:
Section 179 allowed amount:
Total deduction with respect to 7 year assets:
Section 179 carryforward (if applicable):
Explanation / Answer
Section 179 Limit: $510,000 (2017 limit)
Cost Recovery for 7 year class asset: $14,290 (610,000 - 510,000) * 0.1429
Income before section 179 and cost recovery: $250,000
Cost Recovery: $109,290 (14,290 + 95,000)
Income before section 179: $140,710
Section 179 allowed amount: $140,710 ( 510,000 0r 140,710 whichever is less)
Total deduction with respect to 7 year assets: $155,000
Section 179 carryforward (if applicable): $369,290 (510,000 - 140,710)
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