Question

Tan Company acquires a new machine (ten-year property) on January 15, 2017, at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2017, at a cost of $40,000. No election is made to use the straight-line method. The company does not make the § 179 election and elects to not take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2017.

a. $24,000
b. $25,716
c. $102,000
d. $132,858
e. None of the above

Answer 1

b. $25,716

Step-by-step explanation:

The total cost recovery Deduction is:

10-year property

MACRS cost recovery ($200,000×0.10) $20,000

7-year property

MACRS cost recovery ($40,000×0.1429) $5,716

Total cost recovery $25,716

Therefore, The total deductions in calculating taxable income related to the machines for 2017 is $25,716.