Problem 8-40 (Algorithmic) (LO. 2, 3, 9)

On April 5, 2020, Javier Sanchez purchased and placed in service a new 7-year class asset costing $405,200 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 $486,240 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: $fill in the blank 1 Total cost recovery deduction in 2021: $fill in the blank 2

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)	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.	OMB No. 1545-0172
		2020 Attachment Sequence No. 179

Name(s) shown on return Javier Sanchez

Business or activity to which this form relates Sanchez Landscaping, LLC

Identifying number 123-45-6789

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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .						1	fill in the blank 3
2	Total cost of section 179 property placed in service (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .						2	fill in the blank 4
3	Threshold cost of section 179 property before reduction in limitation (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . .						3	fill in the blank 5
4	Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .						4	fill in the blank 6
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	fill in the blank 7
6	(a) Description of property	(b) Cost (business use only)		(c) Elected cost
	Landscaping equipment	fill in the blank 8		fill in the blank 9
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 . . . . . . . . . . . . . . . . . . . . . . . . . . .						8	fill in the blank 10
9	Tentative deduction. Enter the smaller of line 5 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .						9	fill in the blank 11
10	Carryover of disallowed deduction from line 13 of your 2019 Form 4562 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .						10	fill in the blank 12
11	Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions) . . . . . .						11	fill in the blank 13
12	Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 . . . . . . . . . . . . . . . . . . . . . . . . .						12	fill in the blank 14
13	Carryover of disallowed deduction to 2021. Add lines 9 and 10, less line 12 . . . .			13	fill in the blank 15
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	Property subject to section 168(f)(1) election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			15
16	Other depreciation (including ACRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			16

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
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 BAssets Placed in Service During 2020 Tax Year Using the General Depreciation System

(a) Classification of property		(b) Month and year placed in service	(c) Basis for depreciation (business/investment use onlysee instructions)	(d) Recovery period	(e) Convention	(f) Method	(g) Depreciation deduction
19a	3-year property
b	5-year property
c	7-year property		fill in the blank 16	7 yrs.	MQHYHY	DDBS/LDDB	fill in the blank 19
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 CAssets Placed in Service During 2020 Tax Year Using the Alternative Depreciation System
20a	Class life					S/L
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	Listed property. Enter amount from line 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			21
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 corporationssee instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			22	fill in the blank 20
23	For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23

For Paperwork Reduction Act Notice, see separate instructions.

Cat. No. 12906N

Form 4562 (2020)