Amad has opened a new business and purchased some new IT equipment (five-year property) for $250,000 and office furniture (seven-year property) for $350,000 on April 9, 2020. He would like to elect the Section 179 expensing in the amount of $500,000 and use MACRS for the balance. He does not want to take the bonus depreciation. He expects his income from the business to be $540,000 (before deducting for the Section 179 expense). He is not sure which asset should be fully expensed.

a. Calculate Amad's total cost recovery if the Section 179 is first taken on the IT equipment (both 179 and first year expense). Calculate the amount for both assets.

b. Calculate Amad's total cost recovery if the Section 179 is first taken on the office furniture (both 179 and first year expense). Calculate the amount for both assets.

c. What is your advice to Amad? Should he take the 179 on the IT equipment or the office furniture, and explain why?

Amad has opened a new business and purchased some new IT equipment (five-year property) for $250,000 and office furniture (seven-year property) for $350,000 on April 9, 2020. He would like to elect the Section 179 expensing in the amount of $500,000 and use MACRS for the balance. He does not want to take the bonus depreciation. He expects his income from the business to be $540,000 (before deducting for the Section 179 expense). He is not sure which asset should be fully expensed.

a. Calculate Amad's total cost recovery if the Section 179 is first taken on the IT equipment (both 179 and first year expense). Calculate the amount for both assets.

b. Calculate Amad's total cost recovery if the Section 179 is first taken on the office furniture (both 179 and first year expense). Calculate the amount for both assets.

c. What is your advice to Amad? Should he take the 179 on the IT equipment or the office furniture, and explain why?