Am I missing something on this question? The question states the Sec. 179 expense is only $25K; but the solution takes $500K 179 expense and deducts regular depreciation from the $500K. The total cost of the equipment did not exceed $2M, so why are we subtracting dollar-for-dollar in the solution?? The question and solution do not make sense to me, can someone please explain? Jeff is this a misprinted question? Please help!
Q# 920; Category 4C:
On February 1, 2014, Pam Baker purchased an $861,000 machine (5-year property) for use in her business. Pam expensed $25,000 under Section 179 in addition to the regular depreciation of 20% in 2014 and 32% in 2015. Pam's total deductions for 2014 and 2015 for the machine are:
A.
$427,800 (2014) and $115,520 (2015).
B.
$407,800 (2014) and $115,520 (2015).
C.
$407,800 (2014) and $123,520 (2015).
D.
$427,800 (2014) and $123,520 (2015).
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Solution:
Pam's 2014 deduction is:
Section 179 $500,000
20% x ($861,000 – $500,000) 72,200
$427,800
Pam's 2015 deduction is:
32% x ($861,000 – $500,000) = $115,520
AUD - 72 - Retake 05/2015
BEC - 79
FAR - 77
REG - 77 - Lost Credit - Retake 2/07/15
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