Question

The client has chosen to take Bonus Depreciation on $400,000 in new assets purchased in 2018.

With the bonus depreciation, the asset makeup of the new assets are as follows:

Description	Date Purchased	Purchase Amount	Bonus DepreciationTaken	Remaining Depreciable Basis
5-year MACRS Property	October 2, 2018	$480,000	$80,000	$400,000
7-year MACRS Property	September 10, 2018	$320,000	$320,000	-
Delivery Truck (over 6,000 lbs): 5-year MACRS Property	October 12, 2018	$40,000	-	$40,000

Using the MACRS tables calculate the Depreciation Expense for the remaining basis for 2018.

Answer 1

The Mathematics of MACRS Depreciation
The standard method of depreciation for federal income tax purposes is called the Modified Accelerated Cost Recovery System, or MACRS. Essentially, a MACRS depreciation schedule will begin with a declining balance method, then switch to a straight line schedule to finish the schedule. The MACRS method was introduced in 1986, and generally property placed into service after that date will be depreciated according to the MACRS method.

Switching from Declining-Balance to Straight-Line

In order to understand how the quickest depreciation can be obtained through a combination of declining-balance and straight-line methods, we offer the following example. However, it is not a true MACRS example, because of partial year considerations that would still need to be taken into account.

Answer :

Date Page Asset It depreiable Value - 50.000 teak pecuning Balance Reclining Balance depreciation Straight line depreciation 4.80.000 - 4.00.000 Current dep Total dep R Closing Value فیلم 2.000 4,789 4.00.000 ܝܘ ܘܘܨܝ4 _( ܦܹܙܐܣ ܘܘܝܘܬܬ x 181 - 79.342 : 39,671 79,342 79,342 365 320,658. 3,20,658 (+140%. = 1,28,263 - 80,000 TA2,375 128, 263 2,07,605 Hess H,977395 +3,053 404. 3 2,84,563 80,000 2 = 80,000 5437 2 76,958 4 w5,437 (1) 40% z 46,175 - 80,000 2 80,000 3,64,563 35,437 35.437 4.09 000 35,437 35,437

Asset 2 8. depreciable Value 2 326,000 year Balance 8raight line Current | Total | declining method Book Value 3.20.000 3,20,000 DO X2) 3,20,000 50,849 50,849 2,69 151 X 203 = 50,849 365 x 203 = 25,424 365 2,69.15) (6) 28.574- 12 76,896 45.714 76,896 1,92, 255 | 192,255 28574, S4, 927. 245,714 5 4,927 132P 137.328 39,234 | 45,714. 45,714 LUTEN 91,614 L 45.714, 45,714 45.900 45,714 45,714 186 I 186 rol 2186 LE Nie.

Date Page Asset 3 Depreciable Value - 40,000 40,000 t e Nil. AS There dipreciable will not Value be is any nie, (wether depreciation.