842 Olga is the proprietor of a small business In 2017 the b

8-42 Olga is the proprietor of a small business. In 2017, the business’s income, before consideration of any cost recovery or § 179 deduction, is $250,000. Olga spends $610,000 on new 7-year class assets and elects to take the § 179 deduction on them. She does not claim any available additional first-year deprecia- tion. Olga’s cost recovery deduction for 2017, except for the cost recovery with respect to the new 7-year assets, is $95,000. Determine Olga’s total cost recovery with respect to the 7-year class assets and the amount of any § 179 carryforward.

Section 179 Limit:

Cost Recovery for 7 year class asset:

Income before section 179 and cost recovery:

Cost Recovery:

Income before section 179:

Section 179 allowed amount:

Total deduction with respect to 7 year assets:

Section 179 carryforward (if applicable):

Solution

Section 179 Limit: $510,000 (2017 limit)

Cost Recovery for 7 year class asset: $14,290 (610,000 - 510,000) * 0.1429

Income before section 179 and cost recovery: $250,000

Cost Recovery: $109,290 (14,290 + 95,000)

Income before section 179: $140,710

Section 179 allowed amount: $140,710 ( 510,000 0r 140,710 whichever is less)

Total deduction with respect to 7 year assets: $155,000

Section 179 carryforward (if applicable): $369,290 (510,000 - 140,710)