Question

Required Information [The following information applies to the questions displayed below) Lina purchased a new car for use in her business during 2019. The auto was the only business asset she purchased during the year and her business was extremely profitable. Calculate her maximum depreciation deductions (including $179 expense unless stated otherwise) for the automobile in 2019 and 2020 (Lina doesn't want to take bonus depreciation for 2019 or 2020) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1. Table 2. and Exhibit 10-10.) d. The vehicle cost $80,000, and she used it 80 percent for business. She sold it on March 1 of year 2 X Answer is not complete. Year Depreciation deduction 2010 2020 0.400

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EXHIBIT 10-10 Automobile Depreciation Limits

	Year Placed in Service
	2019*	2018	2017	2016
Recovery Year 1	10,000**	10,000*	3,160*	3,160*
Recovery Year 2	16,000	16,000	5,100	5,100
Recovery Year 3	9,600	9,600	3,050	3,050
Recovery Year 4 and after	5,760	5,760	1,875	1,875

TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter

Depreciation Rate for Recovery Period
	5-Year	7-Year
Year 1	35.00%	25.00%
Year 2	26.00	21.43
Year 3	15.60	15.31
Year 4	11.01	10.93
Year 5	11.01	8.75
Year 6	1.38	8.74
Year 7		8.75
Year 8		1.09

TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter

Depreciation Rate for Recovery Period
	5-Year	7-Year
Year 1	25.00%	17.85%
Year 2	30.00	23.47
Year 3	18.00	16.76
Year 4	11.37	11.97
Year 5	11.37	8.87
Year 6	4.26	8.87
Year 7		8.87
Year 8		3.34

TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter

Depreciation Rate for Recovery Period
	5-Year	7-Year
Year 1	15.00%	10.71%
Year 2	34.00	25.51
Year 3	20.40	18.22
Year 4	12.24	13.02
Year 5	11.30	9.30
Year 6	7.06	8.85
Year 7		8.86
Year 8		5.53

TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter

Depreciation Rate for Recovery Period
	5-Year	7-Year
Year 1	5.00%	3.57%
Year 2	38.00	27.55
Year 3	22.80	19.68
Year 4	13.68	14.06
Year 5	10.94	10.04
Year 6	9.58	8.73
Year 7		8.73
Year 8		7.64

Table 1 MACRS Half-Year Convention

Depreciation Rate for Recovery Period
	3-Year	5-Year	7-Year	10-Year	15-Year	20-Year
Year 1	33.33%	20.00%	14.29%	10.00%	5.00%	3.750%
Year 2	44.45	32.00	24.49	18.00	9.50	7.219
Year 3	14.81	19.20	17.49	14.40	8.55	6.677
Year 4	7.41	11.52	12.49	11.52	7.70	6.177
Year 5		11.52	8.93	9.22	6.93	5.713
Year 6		5.76	8.92	7.37	6.23	5.285
Year 7			8.93	6.55	5.90	4.888
Year 8			4.46	6.55	5.90	4.522
Year 9				6.56	5.91	4.462
Year 10				6.55	5.90	4.461
Year 11				3.28	5.91	4.462
Year 12					5.90	4.461
Year 13					5.91	4.462
Year 14					5.90	4.461
Year 15					5.91	4.462
Year 16					2.95	4.461
Year 17						4.462
Year 18						4.461
Year 19						4.462
Year 20						4.461
Year 21						2.231

Answer 1

c. The depreciation expense will be $8000  in 2019 and 12800 in 2020, calculated as follows:
Description	Year 2019	Year 2020	Explanation
(1) Original basis of auto	$80,000	$80,000	Assumed in problem
(2) MACRS depreciation rate	20%	32%	5-yr prop, yr. 1, ½ yr. convention.
(3) Full MACRS depreciation expense	$16,000	$25,600	(1) x (2)
(4) Maximum auto depreciation	$10,000	$16,000	Luxury auto limits
(5) Depreciation deduction for year based on 100% business use	$10,000	$16,000
	$10,000	$16,000	Lesser of (3) or (4)
(6) Business use percentage	80%	80%
Depreciation deduction for year	$8,000	$12,800	(5) x (6)
d)
Description	Year 2020	Explanation
(1) Original basis of auto	$80,000	Assumed in problem
(2) MACRS depreciation rate	32%	5-yr prop, yr. 1, ½ yr. convention.
(3) Full MACRS depreciation expense	$25,600	(1) x (2)
(4) Maximum auto depreciation	$16,000	Luxury auto limit year 2
(5) Depreciation for entire year	$16,000	Lesser of (3) or (4)
(6) Partial year	50%	Half year of depreciation (half-year convention)
(7) Depreciation deduction for year	$8,000
(8) Business use percentage	80%
Depreciation deduction for year	$6,400	(7) x (8)
The depreciation expense will be $8000 in 2019 (as calculated in part c above).The depreciation expense will be $6400 in 2020
f)
Description	Year 2019	Year 2020	Explanation
(1) Original basis of auto	$80,000	N/A	Assumed in problem
(2) Section 179 expense	$25,000	N/A	Maximum §179 expense for SUV
(3) Depreciable basis	$55,000	$55,000	(1) – (2)
(4) MACRS depreciation rate	20%	32%	5-yr prop, yr. 1, ½ yr. convention.
(5) Full MACRS depreciation expense	$11,000	$17,600	(3) x (4)
Depreciation deduction in including §179 expense for year	$36,000	$17,600	(2) + (5)
The depreciation expense will be $36,000 in 2019 and $17,600 in 2020.