roblem 843 LO 2 3 9 n June 5 2016 Javier Sanchez purchased a

roblem 8-43 (LO. 2, 3, 9) n June 5, 2016, Javier Sanchez purchased and placed in service a new 7-year class asset costing $550,000 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC). During 2016, his business generated a net income of $945,780 before any § 179 immediate expense election. Determine the maximum deductions (including first year additional that Javier Sanchez can claim with respect to this asset in 2016 and 2017 If required round your intermediate computations and final answers to the nearest dollar. Click here to access the depreciation table to use for this problem. The maximum § 179 for 2016 is $500,000 and the reduction threshold is S2,0 10,000. in 2017. a· Javier Sanchez\'s total cost recovery deduction in 2016 is b. Complete Javier\'s form 4562 (page 1) for 2016. His Social Securty number is 123-45-6789. If an amount is zero, enter \"0: Enter amounts as positive numbers. OMB No. Form 4562 Depreciation and Amortization (Including Information on Listed Property) Attach to your tax return. Information about Form 4562 and its separate instructions is at www.irs.gov/form4562 20 Department of the Attachmer Treasury Internal Revenue Service (99) Name(s) shown on return Javier Sanchez Business or activity to which this form relates Sanchez Landscaping, LLC Identifying num 123-45 6789 Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part . Part I Maximum amount (see instructions)

Solution

The total cost recovery deduction for 2016:

Depreciation = 550000*1 4.29%= 78595$

And the cost of equipment= 500000-78595= 421405$

So the total deduction for 2016 = 5,00,000$

And for 2017, deduction= 5,00,000* 24.49%= 122,450$