In 2011,Walter Purchased a $75,000 Milling Machine During the Year,planning

question 1

Multiple Choice

In 2011,Walter purchased a $75,000 milling machine during the year,planning to write off $40,000 as a Section 179 expense.He had taxable income before depreciation of $40,000,and will depreciate the remaining $35,000 over a 5-year period.

• A)The total amount of the $75,000 Walter can write off in 2011 is $47,000.
• B)He can write off $40,000 as a Section 179 expense,but cannot take additional depreciation as his taxable income before depreciation is only $40,000.
• C)He can take depreciation of $7,000 and $40,000 of Section 179 write-off,creating a $7,000 loss after depreciation.
• D)He can take $7,000 in depreciation and $33,000 of Section 179 write-off,but the remaining $7,000 of Section 179 write-off must be allocated over the remaining life of the asset.
• E)In 2012,if his taxable income before depreciation is sufficient,he can take the second year-depreciation on the $35,000 not immediately written off plus $7,000 of Section 179 write-off that could not be used in the prior year.