LO.2, 3 Olga is the proprietor of a small business. In 2020, the business’s income, before consideration of any cost recovery or § 179 deduction, is $250,000. Olga spends $620,000 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 2020, except for the cost recovery with respect to the new 7-year assets, is $95,000. Determine Olga’s total cost recovery for 2020 with respect to the 7-year class assets and the amount of any § 179 carryforward.
LO.2, 3 Olga is the proprietor of a small business. In 2020, the business’s income, before consideration of any cost recovery or § 179 deduction, is $250,000. Olga spends $620,000 on new 7-year class assets and elects to take the § 179 deduction on them. She does not claim any available additional first-year
As per IRS, Sec. 179 deals with depreciation or cost recovery deduction for the assets purchased by small and medium-sized businesses under the value limited by the section. This section allows the businesses to take the complete depreciation deduction for the asset in the first year of purchase itself. Businesses which does not elect the deduction under Sec. 179 deductions have to depreciate the asset under MACRS as per the rates prescribed for different classes and deduction is also allowed as per the prescribed rules and not at once.
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