CPA Exam — REG (Regulation)Federal Taxation of Property TransactionsMedium
A business, 'Green Valley Farms', purchased a used tractor for $75,000 and placed it in service on April 1, 2023. The tractor is 7-year MACRS property. What is the maximum Section 179 expense deduction 'Green Valley Farms' can claim for the tractor in 2023, assuming they have sufficient taxable income and no other asset purchases?
- A$1,160,000
- B$60,000
- C$0
- D$75,000
Show answer & explanationAnswer & explanation
Correct answer: D. $75,000
For 2023, the maximum Section 179 expense deduction is $1,160,000. Since the tractor's cost ($75,000) is well below this limit and also below the phase-out threshold, the full cost of the tractor can be expensed under Section 179.
Why the other options are wrong
- A. Incorrect. This is the maximum Section 179 deduction for 2023, but the question asks for the maximum *for the tractor*, which is its cost.
- B. Incorrect. This is an arbitrary number not related to the current Section 179 limits.
- C. Incorrect. A Section 179 deduction is generally available for qualifying property.
Section 179 Expense Deduction
Allows businesses to deduct the full purchase price of qualifying property placed in service during the tax year, up to an annual limit.
- For new or used tangible personal property (and certain real property).
- Subject to annual dollar limit ($1,160,000 for 2023).
- Subject to a taxable income limitation and phase-out threshold.
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