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.) b. The vehicle cost $50,000, and business use Is 100 percent. Year Depreciation deduction 2019 2020

Answer 1

calculate the depreciation expenses for 2019 and 2020 :
particular	2019	2,020
	amount ($)	amount ($)
original basis of auto ( given ) ( A)	$ 50,000	$ 50,000
MACRS depreciation rate ( note 1) ( B)	20%	32%
Full MACRS depreciation expense { C = A*B )	$ 10,000	$ 16,000
	( $50,000*20%)	( $50,000*32 %)
Maximum auto depreciation ( note 2 )	$ 10,100	$ 16,100
depreciation expenses for year ( note 3 )	$ 10,000	$ 16,000

notes :
1) purchase of new are classified as 5 years under MACRS
so, for 2019 (first year depreciation) = 20 %
for 2020 ( 2nd year depreciation ) = 32 %
2) maximum auto depreciation :
for 2019 (1 year with out bonus )= $ 10,100
for 2020 ( 2nd year ) = $ 16,100
3) depreciation expenses for year:
here, full MACRS depreciation expense or Maximum auto depreciation whichever
is lower is taken for depreciation expenses for year
for 2019 :
$ 10,000 or $ 10,100 whichever is lower
so, $ 10,000 is taken for 2019
for 2020:
$ 16,000 or $ 16,100 whichever is lower
so, $ 16,000 is taken for 2020