ExpertHard1 markMultiple Choice
CPA · Question 57 · Area III: Property Transactions
Which of the following statements regarding the Section 179 expense deduction is correct for the current year?
Which of the following statements regarding the Section 179 expense deduction is correct for the current year?
Answer options:
A.
It can create a net operating loss for the business.
B.
It applies to all real property.
C.
The deduction is phased out dollar-for-dollar if total equipment placed in service exceeds a specific threshold.
D.
It is not available for used equipment.
How to approach this question
Section 179 Limits: 1. Dollar Limit (Max deduction). 2. Investment Limit (Phase-out if you buy too much). 3. Income Limit (Cannot create a loss).
Full Answer
C.The deduction is phased out dollar-for-dollar if total equipment placed in service exceeds a specific threshold.✓ Correct
The Section 179 deduction is limited by the amount of qualifying property placed in service. If the cost of property exceeds the investment threshold, the deduction is reduced dollar-for-dollar. Also, Section 179 cannot exceed taxable income from the trade or business.
Common mistakes
Thinking Section 179 can create a loss (Bonus Depreciation can, Section 179 cannot).
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