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A taxpayer purchased and placed in service during the year a $100,000 piece of equipment. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. Assume that, of the allowable Sec. 179 limit for the current year, $25,000 is allocated to this piece of equipment. The taxpayer has opted out of bonus depreciation. What amount is the maximum allowable depreciation?

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Answer: $35,717,50

Explanation:

Property basis = $100,000

Section 179 expense for current year = $25,000

1st year Depreciation rate = 14.29%

Adjusted basis = property basis - section 179 expense

Adjusted basis = $(100,000 - 25,000) = $75,000

Adjusted basis × Depreciation rate

$75,000 × 14.29%

$75,000 × 0.1429 = $10,717.50

Maximum allowable Depreciation ;

$(25,000 + 10,717.50) = $35,717.50

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