Anyone understand why Section 179 $25k reduction as taken into account when it's fully phased out at costs of $225+??
Problem (NINJA 925)
A taxpayer purchased and placed in service during the year a $761,000 piece of equipment. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. There is an allowable Section 179 limit in 2014 of $25,000. What amount is the maximum allowable depreciation without using bonus depreciation?
Answer:C. $130,174
A taxpayer who elects to expense under Section 179 must reduce the depreciable basis of the Section 179 property by the amount of the Section 179 expense deduction. The maximum allowable depreciation is calculated as follows:
Basis of property $761,000
Less: Section 179 expense (25,000)
Adjusted basis $736,000
1st-year MACRS rate x 14.29%
1st-year depreciation $105,174
Section 179 expense 25,000
Maximum allowable depreciation $130,174
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BUT THE TEXT REFERENCE SAYS: The ceiling amount of $25,000 for 2014 is reduced dollar-for-dollar for personal property acquisitions in excess of $200,000 (i.e., if more than $200,000 of property is placed in service during a tax year, no Section 179 deduction is allowed).
Hope someone sees what I am missing?
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