LO.7 Lori, who is single, purchased 5-year class property for $200,000 and 7-year class property for $420,000 on May 20, 2018. 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 she should elect immediate 179 expens- ing in the amount of $520,000, but she doesn't know which asset she should com- pletely expense under $179. She does not claim any available additional first-year depreciation.

a. Determine Lori's total deduction if the $ 179 expense is first taken with respect to the 5-year class asset.

b. Determine Lori's total deduction if the $ 179 expense is first taken with respect to the 7-year class asset.

c. What is your advice to Lori?

d. Assume that Lori is in the 24% marginal tax bracket and that she uses 179 on the 7-year asset. Determine the present value of the tax savings from the depreciation deductions for both assets. See Appendix F for present value fac- tors, and assume a 6% discount rate.

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.