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goblinko
2 months ago
7

John Rawls owns and operates Philosophical Consulting, Inc. During 2019 and 2020 he made the following purchases of assets for u

se in the business:
Asset Date of Purchase Cost
Office Furniture 5/1/2019 $100,000
Computer System 9/15/2020 $500,000
In addition, his business income before any cost recovery deduction in 2020 is $350,000. Prior to 2020, he only used regular MACRS depreciation for all purchases. However, at the beginning of 2020 he decides to take the maximum deduction possible for all new purchases. Ignore any excess business or net operating loss limitations.
Required: What is the 2020 cost recovery deduction for Philosophical Consulting, Inc?
Business
1 answer:
soldi70 [3.6K]2 months ago
6 0

Answer:

The correct answer is "600000".

Explanation:

The values provided are:

Cost of office furniture,

= $100,000

Cost of the computer system,

= $500,000

  • The revised MACRS allows a corporation to gradually reduce the mortgage balance of such depreciating assets.
  • In the initial years, MACRS permits accelerated depreciation but then slows down the process. This is advantageous for businesses from a taxation perspective.

Now,

The cost recovery deduction is calculated as:

= Office \ furniture+Computer \ system

Substituting the values gives us

= 100000+500000

= 600000

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