8-40 (Algorithmic) (LO. 2, 3, 9) On February 20, 2020, Javier Sanchez purchased and placed in service a new 7-year class asset costing $388,400 for use in his landscaping business, which he operates as a single member LLC (Sanchez Landscaping LLC). Rather than using bonus depreciation, Javier would like to use 179 to expense $200,000 of this asset and then use regular MACRS to cost recover the remaining cost. During 2020, his business generated a net income of $466,080 before any 179 immediate expense election. 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. a. Determine the cost recovery deductions (including first year additional depreciation) that Javier Sanchez can claim with respect to this asset in 2020 and 2021. Total cost recovery deduction in 2020: $ Total cost recovery deduction in 2021: b. Complete Javier's Form 4562 (page 1) for 2020. Note: For 2020, the maximum 179 is $1,040,000 and the threshold amount is $2,590,000. If an amount is zero, enter "0". Enter amounts as positive numbers. Form 4562 Department of the Treasury Internal Revenue Service (99) Name(s) shown on return Javier Sanchez Part I Depreciation and Amortization (Including Information on Listed Property) Attach to your tax return. Go to www.irs.gov/Form4562 for instructions and the latest information. Business or activity to which this form relates Sanchez Landscaping, LLC Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I. OMB No. 1545-0172 2020 Attachment Sequence No. 179 Identifying number 123-45-6789 1 Maximum amount (see instructions) .. 2 Total cost of section 179 property placed in service (see instructions) .. 3 Threshold cost of section 179 property before reduction in limitation (see instructions). 4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- 1 2 3 4 5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing separately, see instructions 6 (a) Description of property 5 (b) Cost (business use only) (c) Elected cost Landscaping equipment 7 Listed property. Enter the amount from line 29 ... 7 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 9 Tentative deduction. Enter the smaller of line 5 or line 8.... 10 Carryover of disallowed deduction from line 13 of your 2019 Form 4562... 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions) ..... 12 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 8 9 10 11 12 13 Carryover of disallowed deduction to 2021. Add lines 9 and 10, less line 12... Note: Don't use Part II or Part III below for listed property. Instead, use Part V. Part II 13 Special Depreciation Allowance and Other Depreciation (Don't include listed property. See instructions.) 14 Special depreciation allowance for qualified property (other than listed property) placed in service during the tax year (see instructions)...... 15 Property subject to section 168(f)(1) election.. 16 Other depreciation (including ACRS) . . . . . . Part III MACRS Depreciation (Don't include listed property. See instructions.) Section A 17 MACRS deductions for assets placed in service in tax years beginning before 2020 . . 18 If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here 14 15 16 17 Section B-Assets Placed in Service During 2020 Tax Year Using the General Depreciation System (b) Month (a) Classification of property and year placed in service (c) Basis for depreciation (business/investment use only- see instructions) (d) Recovery period (e) Convention (f) Method (g) Depreciation deduction 19a 3-year property b 5-year property c 7-year property d 10-year property 7 yrs. e 15-year property f 20-year property g 25-year property 25 yrs. S/L h Residential rental 27.5 yrs. MM S/L property 27.5 yrs. MM S/L BAKA 19a 3-year property b 5-year property c 7-year property d 10-year property e 15-year property f 20-year property g 25-year property 7 yrs. 25 yrs. S/L h Residential rental property i Nonresidential real property 27.5 yrs. MM S/L 27.5 yrs. MM S/L 39 yrs. MM S/L MM S/L Section C-Assets Placed in Service During 2020 Tax Year Using the Alternative Depreciation System S/L 20a Class life b 12-year 12 yrs. S/L c 30-year 30 yrs. MM S/L d 40-year 40 yrs. MM S/L Part IV Summary (See instructions.) 21 21 Listed property. Enter amount from line 28... 22 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. Enter here and on the appropriate lines of your return. Partnerships and S corporations-see instructions . . . . 22 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs.. For Paperwork Reduction Act Notice, see separate instructions. 23 Cat. No. 12906N Form 4562 (2020) Exhibit 8.3 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 Recovery 3-Year 5-Year 7-Year Year (200% DB) (200% DB) (200% DB) 10-Year (200% DB) 15-Year (150% DB) 20-Year (150% DB) 1 33.33 20.00 14.29 10.00 5.00 3.750 2 44.45 32.00 24.49 18.00 9.50 7.219 3 14.81* 19.20 17.49 14.40 8.55 6.677 4 7.41 11.52* 12.49 11.52 7.70 6.177 5 11.52 8.93* 9.22 6.93 5.713 6 5.76 8.92 7.37 6.23 5.285 7 8.93 6.55* 5.90* 4.888 8 4.46 6.55 5.90 4.522 9 6.56 5.91 4.462* 10 6.55 5.90 4.461 11 3.28 5.91 4.462 12 5.90 4.461 13 5.91 4.462 14 5.90 4.461 15 5.91 4.462 16 2.95 4.461 17 4.462 18 4.461 19 4.462 20 4.461 21 2.231 *Switchover to straight-line depreciation. Exhibit 8.4 MACRS Accelerated Depreciation for Personal Property Assuming Mid-Quarter Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 (Partial Table * ) 3-Year Recovery Year First Quarter Second Quarter Third Quarter Fourth Quarter 1 58.33 41.67 25.00 8.33 2 27.78 38.89 50.00 61.11 5-Year Recovery Year First Quarter Second Quarter Third Quarter Fourth Quarter 1 35.00 25.00 15.00 5.00 2 26.00 30.00 34.00 38.00 7-Year Recovery Year First Quarter Second Quarter Third Quarter Fourth Quarter 1 25.00 17.85 10.71 3.57 2 21.43 23.47 25.51 27.55 Exhibit 8.5 MACRS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention * For Property Placed in Service after December 31, 1986 Other Recovery Years Last Recovery Year MACRS Class % First Recovery Years % Year % Year 3-year 16.67 2-3 33.33 4 16.67 5-year 10.00 2-5 20.00 6 10.00 7-year 7.14 2-7 14.29 8 7.14 10-year 5.00 2-10 10.00 11 5.00 15-year 3.33 2-15 6.67 16 3.33 20-year 2.50 2-20 5.00 21 2.50 Note: The last two rows of this table are used for qualified improvement property (15-year normal MACRS; 20-year ADS). Exhibit 8.8 MACRS Straight-Line Depreciation for Real Property Assuming Mid-Month Convention* (Percentage Rates) *The official tables contain a separate row for each year. For ease of presentation, certain years are grouped in these tables. In some instances, this will produce a difference of .001 for the last digit when compared with the official tables. For Property Placed in Service after December 31, 1986: 27.5-Year Residential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): Year(s) 2 + 1 3 4 5 6 7 8 9 10 11 12 1 3.485 3.182 2-18 19-27 28 3.636 3.637 2.879 3.636 3.636 3.637 3.637 2.576 3.636 3.637 2.273 1.970 1.667 3.636 3.636 29 1.970 2.273 2.576 2.879 0.000 0.000 0.000 0.000 3.637 3.182 0.000 3.637 3.485 0.000 3.636 3.637 1.364 1.061 3.636 3.636 3.637 3.637 3.636 3.636 3.636 0.152 0.455 0.758 0.758 3.636 3.637 0.455 0.152 3.636 3.636 3.637 3.637 3.636 3.636 3.636 1.061 1.364 1.667 For Property Placed in Service after December 31, 1986, and before May 13, 1993:31.5-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): Year(s) 1 2 3 4 5 6 7 8 9 10 11 12 1 3.042 2.778 2-19 3.175 20-31 3.174 32 1.720 3.175 3.174 3.174 1.984 2.249 2.513 3.175 33 0.000 0.000 0.000 0.000 2.249 1.984 1.720 1.455 3.175 3.175 3.175 3.175 3.174 3.174 3.174 3.174 2.513 2.778 3.042 3.175 0.000 0.000 0.132 0.397 1.190 3.175 0.926 0.661 3.175 0.397 0.132 3.175 3.174 3.174 3.174 3.175 3.174 3.174 3.175 3.175 3.175 3.175 3.175 3.175 0.661 0.926 1.190 1.455 For Property Placed in Service after May 12, 1993: 39-Year Nonresidential Real Property Recovery The Applicable Percentage Is (Use the Column for the Month in the First Year the Property Is Placed in Service): Year(s) 1 2 3 4 5 6 7 8 1 2.461 2.247 2.033 1.819 1.605 2-39 2.564 2.564 2.564 2.564 2.564 40 0.107 0.321 0.535 0.749 0.963 1.391 1.177 2.564 2.564 1.177 1.391 9 0.963 0.749 0.535 10 11 12 0.321 0.107 2.564 2.564 2.564 1.605 1.819 2.033 2.247 2.564 2.564 2.461