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): (Use MACRS Table 1, Table 2, and Exhibit 10-10.)

f. The vehicle cost $80,000 and is an SUV that weighs 6,500 pounds. Business use was 100 percent.

Answer 1

The depreciation expense in 2019 and 2020 are calculated as follows:

Description	2019 amount	2020 amount	Explanation
(1) Original basis of car	$80,000	N/A	Given in problem
(2) Section 179 expense	$25,000	N/A	Maximum Section 179 expense for SUV
(3) Depreciable basis	$55,000	$55,000	(1) - (2)
(4) MACRS depreciation rate	20%	32%	5-yr prop, yr 1, 1/2 yr convention
(5) Full MACRS depreciation expense	$11,000	$17,600	(3) * (4)
Depreciation deduction in including section 179 expense for year	$36,000	$17,600	(2) + (5)

The depreciation expense will be $36,000 for 2019 and $17,600 for 2020.