Question

Problem 5-47 (Algorithmic) (LO. 8) On February 15, 2018, Leo purchased and placed in service a new car that cost $66,600. The business use percentage for the car is always 100%. He does not take the additional first-year depreciation or any $ 179. If required, round your answers to the nearest dollar. Click here to access the depreciation table of the textbook. Click here to access the limits for certain autom.biles. a. What MACRS convention applies to the new car? Half-year b. Is the automobile considered listed property"? Yes C. Leo's cost recovery deduction in 2018 is $ x and for 2019 is $ Feedback Check My Work Assets used in a trade or business or for the production of income are eligible for cost recovery if they are subject to wear and tear, d or decline from natural causes, or obsolescence.

Answer 1

on Feb 15, 2018, you purchased a car for $66,600. business use was 100%. Utilizing the MACRS table our depreciation rate is 20%.

Now that we have all the information we need, let’s calculate the depreciation deduction:

Step 1: Calculate depreciable basis

• $66,600 × 100% = $66,600(depreciable basis)

Step 2: Calculate MACRS depreciation tax deduction

• $66,600 × 0.20 = $13,320 depreciation tax deduction)

13,320 would be the cost recovery deduction for 2018

The same applies to 2019,with MACRS depreciation rate at 32%

66,600 x 32% =21,312 for 2019 .

Other methods of depreciation include first-year expensing (Section 179 expensing) that allows a deduction of the total cost or large portion of it in the tax year when the property was put in service.the §179 deduction and bonus depreciation can be claimed for the same property, but the §179 deduction must be subtracted first before calculating the bonus depreciation. However, only a §179 deduction or regular depreciation can be claimed for used items.

Bonus depreciation cannot be claimed for property, such as listed property.Here in the present case CAR is a listed property hence bonus depreciation cannot be claimed.

Hope that helped.Please share your feed back.Thank you.