PLEASE INCLUDE CALCULATIONS

Problem $8-38($LO$.2,3,9)$

Lori, who is single, purchased and placed in service $5-$year class property for $$200,000$ and $7-$year class property for $$420,000$ on May $20,2023.$ Lori expects the taxable income derived from her business $($before considering any amount expensed under $179)$ to be about $$550,000.$ Lori has determined that she should elect immediate $179$ expensing in the amount of $$520,000,$ but she doesn't know which asset she should completely expense under $179.$ She does not claim any available additional first$-$year depreciation.

Click here to access Exhibit $8\mathrm{.}1$ and the depreciation table to use for this problem.

If an amount is zero, enter $"0".$

Question Content Area

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

$5-$year class property$$Immediate expense deduction under $179$$fill in the blank $74570$cf$9$cf$86046\_1$Regular MACRSfill in the blank $74570$cf$9$cf$86046\_27-$year class property$$Immediate expense deduction under $179$$fill in the blank $74570$cf$9$cf$86046\_3$Regular MACRSfill in the blank $74570$cf$9$cf$86046\_4$Total deduction$fill in the blank $74570$cf$9$cf$86046\_5$

Question Content Area

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

$7-$year class property$$Immediate expense deduction under $179$$fill in the blank $0$e$925602$c$02500$a$\_1$Regular MACRSfill in the blank $0$e$925602$c$02500$a$\_25-$year class property$$Immediate expense deduction under $179$$fill in the blank $0$e$925602$c$02500$a$\_3$Regular MACRSfill in the blank $0$e$925602$c$02500$a$\_4$Total deduction$fill in the blank $0$e$925602$c$02500$a$\_5$

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c$.$What is your advice to Lori?

If $179$ expense is first allocated to the

five$-$yearseven$-$year

the cost recovery deduction for the year would be $fill in the blank $0$b$0$e$50$fd$107$cfdf$\_2$ larger.

Question Content Area

d$.$Determine the present value of the tax savings from the cost recovery deductions for both assets, assuming that Lori is in the $24\%$ marginal tax state and Federal income bracket and that she elects $179$ for the $7-$year class asset. Assume MACRS depreciation and a $6\%$ discount rate with the following present value factors:

YearFactorYearFactor$20231\mathrm{.}00020270\mathrm{.}792120240\mathrm{.}943420280\mathrm{.}747320250\mathrm{.}890020290\mathrm{.}705020260\mathrm{.}839620300\mathrm{.}6651$

Round each present value computation to the nearest dollar.

The present value of the tax savings from the cost recovery deductions for both assets $fill in the blank $51$d$1$c$8$f$7$cff$1049\_1.$

Question Content Area

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.

Round each present value computation to the nearest dollar.

The present value of the tax savings under this choice is $fill in the blank $51$fb$25$f$6403$af$91\_1.$

Lori should elect to expense the

$5-$year$7-$year

asset.

Lori, who is single, purchased and placed in service $5-$year class property for $$200,000$ and $7-$year class

property for $$420,000$ on May $20,2023.$ Lori expects the taxable income derived from her business $($before

considering any amount expensed under $179)$ to be about $$550,000.$ Lori has determined that she should

elect immediate $179$ expensing in the amount of $$520,000,$ but she doesn't know which asset she should

completely expense under $179.$ She does not claim any available additional first$-$year depreciation.

Click here to access Exhibit $8\mathrm{.}1$ and the depreciation table to use for this problem.

If an amount is zero, enter $"0".$

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

year class asset.

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

year class asset.

c$.$ What is your advice to Lori?

If $179$ expense is first allocated to the

the cost recovery deduction for the year

would be $

larger.

d$.$ Determine the present value of the tax savings from the cost recovery deductions for both assets,

assuming that Lori is in the $24\%$ marginal tax state and Federal income bracket and that she elects $179$

for the $7-$year class asset. Assume MACRS depreciation and a $6\%$ discount rate with the following present

value factors:

Round each present value computation to the nearest dollar.

The present value of the tax savings from the cost recovery deductions for both assets $

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.

Round each present value computation to the nearest dollar.

The present value of the tax savings under this choice is :

Lori should elect to expense the

asset.