1) Olga is the proprietor of a small business. In 2014, the business's income, before consideration of any cost recovery or § 179 deduction, is $104,000.
Olga spends $40,000 on new 7-year class assets and elects to take the § 179 deduction on them. She does not claim any available additional first-year depreciation. Olga's cost recovery deduction for 2014, except for the cost recovery with respect to the new 7-year assets, is $86,000.
a. What is the tentative amount of Olga's overall § 179 deduction for the seven-year class assets before any income limitation? $
b. Olga's cost recovery amount (excluding any § 179 deduction) for the seven-year class assets is $
c. The total amount of Olga's § 179 deduction for the seven-year class assets after any income limitation is $
d. Olga's total cost recovery depreciation deduction (including any § 179 deduction) is $
e. What is the amount of any § 179 carryforward? $
2) On March 15, 2014, Helen purchased and placed in service a new Escalade. The purchase price was $62,000, and the vehicle had a rating of 6,500 GVW. The vehicle was used 100% for business.
Section § 179 expense $
MACRS cost recovery
Total deduction $
3) Sally purchased a new computer (5-year property) on June 1, 2014, for $4,000. Sally could use the computer 100% of the time in her business, or she could allow her family to use the computer as well. Sally estimates that if her family uses the computer, the business use will be 45% and the personal use will be 55%.
Determine the tax cost to Sally, in the year of acquisition, of allowing her family to use the computer. Assume that Sally would not elect § 179 limited expensing and that her marginal tax rate is 28%. She does not claim any available additional first-year depreciation.
a. What is the amount of the depreciation deduction if the computer is used 100% for business? $
b. If Sally allows 55% personal use of the computer by her family, then the amount of the depreciation deduction is $ .
c. What is the tax cost to Sally, in the year of acquisition, of allowing her family to use the computer? $
4) In 2014, Muhammad purchased a new computer for $16,000. The computer is used 100% for business. Muhammad did not make a § 179 election with respect to the computer. He does not claim any available additional first-year depreciation.
If Muhammad uses the MACRS statutory percentage method, then his cost recovery deduction for 2014 for computing taxable income is $ and for computing his alternative minimum tax is $ .