Augie purchased one new asset during the year (five-year property) on November 10, 2017, at a cost of $660,000. She would like to use the § 179 election and will also take additional first-year depreciation. The income from the business before the cost recovery deduction and the § 179 deduction was $600,000. Determine the total cost recovery deduction with respect to the asset for 2017.

a. $30,500

b. $320,250

c. $510,000

d. $588,750

e. None of the above

Answer:option (e)

None of the above

Explanation:

The mid quarter convention applies to this MACRS calculation.

§ 179 expense $500,000

Additional first-year depreciation = [ ($650,000 - $500,000) * 0.50]

$75,000 MACRS cost recovery ($75,000 * 0.05) 3,750

Total = $78,750

Income from the business before the cost is recovered is $600,000 less. Therefore, the Total cost recovered;

Total cost recovery = (78,750)

§ 179 business income limitation $521,250

Therefore, Augie's total cost recovery deduction;

= $500,000 + $78,750

= $578,750.