Question

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)

d. The vehicle cost $80,000, and she used it 80 percent for business. She sold it on March 1 of year 2. Year Depreciation deduction 2019 2020 $ 6,400

Answer 1

d
Description	2019	2020
(1) Original basis of auto	$      80,000	$      80,000
(2) MACRS depreciation rate	20%	32%
(3) Full MACRS depreciation expense	$      16,000	$      25,600
(4) Maximum auto depreciation	$      10,000	$      16,000
(5)Depreciation deduction for year based on 100% business use	$      10,000	$      16,000
(6) Business use percentage	80%	40%
Depreciation deduction for year	$        8,000	$        6,400
e
Description	2019	2020
(5)Depreciation deduction for year based on 100% business use	$      10,000	$      16,000
(6) Business use percentage	20%	20%
Depreciation deduction for year	$        2,000	$        3,200
f
Description	2019	2020
Cost of auto	$ 80,000	NA
Section 179 Expense	$ 25,000	NA
Depreciable basis	$ 55,000	$ 55,000
MACRS Dep. Rate	20%	32%
Full MACRS Dep. Expense	$ 11,000	$ 17,600