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) a. The vehicle cost $34,800 and business use is 100 percent (ignore $179 expense). Year Depreciation deduction 2019 2020

Answer 1

a.	Particulars	2019	2020
	Original Basis of Auto	$34,800	$34,800
	x MACRS Depreciation	20%	32%
	MACRS Depreciation Expense (a)	$6,960	$11,136
	Maximum Depreciation Allowed (b)	$10,000	$16,000
	Depreciation Deduction	$6,960	$11,136
	Lesser of (a) or (b)
b	Particulars	2019	2020
	Original Basis of Auto	$94,000	$94,000
	x MACRS Depreciation	20%	32%
	MACRS Depreciation Expense (a)	$18,800	$30,080
	Maximum Depreciation Allowed (b)	$10,000	$16,000
	Depreciation Deduction	$10,000	$16,000
	Lesser of (a) or (b)
c	Particulars	2019	2020
	Original Basis of Auto	$94,000	$94,000
	x MACRS Depreciation	20%	32%
	MACRS Depreciation Expense (a)	$18,800	$30,080
	Maximum Depreciation Allowed (b)	$10,000	$16,000
	Depreciation Deduction (Lesser of (a) or (b))	$10,000	$16,000
	x Business Use	80%	80%
	Actual Depreciation Deduction	$8,000	$12,800
d	Particulars	2019	2020
	Original Basis of Auto	$94,000	$94,000
	x MACRS Depreciation	20%	32%
	MACRS Depreciation Expense (a)	$18,800	$30,080
	Maximum Depreciation Allowed (b)	$10,000	$16,000
	Depreciation Deduction (Lesser of (a) or (b))	$10,000	$16,000
	x Business Use	80%	80%
	Depreciation Deduction	$8,000	$12,800
	x Partial Year	100%	50%
	Actual Depreciation Deduction	$8,000	$6,400
e	Particulars	2019	2020
	Original Basis of Auto	$94,000	$94,000
	x MACRS Depreciation	20%	32%
	MACRS Depreciation Expense (a)	$18,800	$30,080
	Maximum Depreciation Allowed (b)	$10,000	$16,000
	Depreciation Deduction (Lesser of (a) or (b))	$10,000	$16,000
	x Business Use	20%	20%
	Actual Depreciation Deduction	$2,000	$3,200
f	Particulars	2019	2020
	179 Expense	$25,000	$0
	MACRS Depreciation Expense
	(94000-25000)*20%	$13,800
	(94000-25000)*32%		$22,080
	Actual Depreciation Deduction	$38,800	$22,080