On May 5, 2020, Javier Sanchez purchased and placed in service a new 7-year class asset costing $371,600 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 $445,920 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. OMB No. 1545-0172 Form 4562 Depreciation and Amortization (Including Information on Listed Property) Department of the Treasury Attach to your tax return. . Internal Revenue Service (99) Go to www.irs.gov/Form4562 for instructions and the latest information. Name(s) shown on return ( Business or activity to which this form relates Javier Sanchez Sanchez Landscaping, LLC Part I Election To Expense Certain Property Under Section 179 Note: If you have any listed property, complete Part V before you complete Part I. 1 Maximum amount (see instructions) 2020 Attachment Sequence No. 179 Identifying number 123-45-6789 1 2 Total cost of section 179 property placed in service (see instructions) 2 3 Threshold cost of section 179 property before reduction in limitation (see instructions). 3 4 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter-0-.. 4 0 5 Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing separately, see instructions 5 6 (a) Description of property (b) Cost (business use only) (c) Elected cost Landscaping equipment 7 Listed property. Enter the amount from line 29.... 7 7 8 Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 8 9 Tentative deduction. Enter the smaller of line 5 or line 8 9 10 Carryover of disallowed deduction from line 13 of your 2019 Form 4562 10 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions) ...... 11 12 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 12 13 Carryover of disallowed deduction to 2021. Add lines 9 and 10, less line 12 .... 13 Note: Don't use Part II or Part III below for listed property. Instead, use Part V. Part II 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)...... 14 15 15 Property subject to section 158(f)(1) election. 16 Other depreciation (including ACRS) ...... MACRS Depreciation (Don't include listed property. See instructions.) 16 Part III Section A 17 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 Section B-Assets Placed in Service During 2020 Tax Year Using the General Depreciation System (b) Month and (c) Basis for depreciation (a) Classification of (d) Recovery year placed in (business/investment use only see (f) Method property period service instructions) 19a 3-year property (9) Depreciation deduction Convention b 5-year property c7-year property 7 yrs. HY DDB d 10-year property 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 i Nonresidential real 39 yrs. MM S/L property MM S/L Section C-Assets Placed in Service During 2020 Tax Year Using the Alternative Depreciation System 20a Class life S/L 30 yrs. 40 yrs. 21 b 12-year 12 yrs. S/L MM S/L c 30-year d 40-year MM S/L Part IV Summary (See instructions.) 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 (9), and line 21. Enter here and on the appropriate lines of your return. Partnerships and corporations-see instructions .... 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs .... Cat. No. 12906N For Paperwork Reduction Act Notice, see separate instructions. 22 23 Form 4562 (2020)
