8 HW eBook Video Calculator Problem 8-41 (LO. 2, 3, 9) Lori, who is single, purchased 5-year class property for $200,000 and 7-year class property for $420,000 on May 20, 2019. Lori expects the taxable income derived from her business (without regard to the amount expensed under 179) to be about $550,000. Lori has determined that she should elect Immediate $ 179 expensing in the amount of $520,000, but she doesn't know which asset she should completely expense under $ 179. She does not claim any available additional first-year depreciation. Click here to access Exhibit 8.1 and the depreciation table to use for this problem. If an amount is zero, enter "O". a. Determine Lori's total cost recovery deduction if the 5 179 expense is first taken with respect to the 5-year class asset. 5-year class property Immediate expense deduction under $ 179 $ 200,000 Regular MACRS 7-year class property Immediate expense deduction under s 9 320,000 Regular MACRS 14,290 Total deduction 534,290 Check My Work acer Video E Calculator Check My Work Under the modified accelerated cost recovery system (MACRS), the cost of an asset is recovered over a predetermined period that is generally shorter than the useful life of the asset or the period the asset is used to produce income, MACRS provides separate cost recovery tables for really (real property) and personalty (personal property). Write-offs are not available for land because it does not have a determinable useful life. Cost recovery allowances for real property, other than land, are based on recovery lives specified in the law. Section 179 (Election to Expense Certain Depreciable Business Assets) permits the taxpayer to elect to write of up to part of the acquisition cost of tangible personal property used in a trade or business. b. Determine Lori's total cost recovery deduction of the 5 179 expense is first taken with respect to the 7-year class asset. 7-year class property Immediate expense deduction under $ 179 420,000 V Regular MACRS S-year class property Immediate expense deduction under $ 179 100,000 Regular MACRS 20,000 Total deduction 540,000 Check My Work acer c. What is your advice to Lori? IF $ 179 expense is first allocated to the seven-year the cost recovery deduction for the year would be $ 5,710 larger. Checy Work Correct d. Determine the present value of the tax savings from the cost recovery deductions for both assets, assuming that Lori is in the 24% marginal tax state and Federal income bracket and that she elects 5 179 for the 7-year asset. Assume MACRS depreciation and a 6% discount rate with the following present value factors: Year 2019 2020 2021 2022 Factor 1.000 0.9434 0.8900 0.8396 Year 2023 2024 2025 2026 Factor 0.7921 0.7473 0.7050 0.6657 Round all computations to the nearest dollar. The present value of the tax savings from the cost recovery deductions for both assets $ 4,025.55 X OhW Check My Work acer The present value of the tax savings from the cost recovery deductions for both assets 4,025.55 X Feedback Check My Work Incorrect e. Assume the same facts as in part (d), except that Lori decides not to use $ 179 on either asset. Determine the present value of the tax savings under this choice. In addition, determine which option Lori should choose The present value of the tax savings under this choice is $ Lori should elect to expense the asset. Feedback Check My Wor Incorrect Checy Woo Partially correct Check My Work Emainstructor Save and 8 HW eBook Video Calculator Problem 8-41 (LO. 2, 3, 9) Lori, who is single, purchased 5-year class property for $200,000 and 7-year class property for $420,000 on May 20, 2019. Lori expects the taxable income derived from her business (without regard to the amount expensed under 179) to be about $550,000. Lori has determined that she should elect Immediate $ 179 expensing in the amount of $520,000, but she doesn't know which asset she should completely expense under $ 179. She does not claim any available additional first-year depreciation. Click here to access Exhibit 8.1 and the depreciation table to use for this problem. If an amount is zero, enter "O". a. Determine Lori's total cost recovery deduction if the 5 179 expense is first taken with respect to the 5-year class asset. 5-year class property Immediate expense deduction under $ 179 $ 200,000 Regular MACRS 7-year class property Immediate expense deduction under s 9 320,000 Regular MACRS 14,290 Total deduction 534,290 Check My Work acer Video E Calculator Check My Work Under the modified accelerated cost recovery system (MACRS), the cost of an asset is recovered over a predetermined period that is generally shorter than the useful life of the asset or the period the asset is used to produce income, MACRS provides separate cost recovery tables for really (real property) and personalty (personal property). Write-offs are not available for land because it does not have a determinable useful life. Cost recovery allowances for real property, other than land, are based on recovery lives specified in the law. Section 179 (Election to Expense Certain Depreciable Business Assets) permits the taxpayer to elect to write of up to part of the acquisition cost of tangible personal property used in a trade or business. b. Determine Lori's total cost recovery deduction of the 5 179 expense is first taken with respect to the 7-year class asset. 7-year class property Immediate expense deduction under $ 179 420,000 V Regular MACRS S-year class property Immediate expense deduction under $ 179 100,000 Regular MACRS 20,000 Total deduction 540,000 Check My Work acer c. What is your advice to Lori? IF $ 179 expense is first allocated to the seven-year the cost recovery deduction for the year would be $ 5,710 larger. Checy Work Correct d. Determine the present value of the tax savings from the cost recovery deductions for both assets, assuming that Lori is in the 24% marginal tax state and Federal income bracket and that she elects 5 179 for the 7-year asset. Assume MACRS depreciation and a 6% discount rate with the following present value factors: Year 2019 2020 2021 2022 Factor 1.000 0.9434 0.8900 0.8396 Year 2023 2024 2025 2026 Factor 0.7921 0.7473 0.7050 0.6657 Round all computations to the nearest dollar. The present value of the tax savings from the cost recovery deductions for both assets $ 4,025.55 X OhW Check My Work acer The present value of the tax savings from the cost recovery deductions for both assets 4,025.55 X Feedback Check My Work Incorrect e. Assume the same facts as in part (d), except that Lori decides not to use $ 179 on either asset. Determine the present value of the tax savings under this choice. In addition, determine which option Lori should choose The present value of the tax savings under this choice is $ Lori should elect to expense the asset. Feedback Check My Wor Incorrect Checy Woo Partially correct Check My Work Emainstructor Save and