Question

Arlington LLC purchased an automobile for $55,000 on July 5, 2019. What is Arlington's depreciation deduction for 2019 if its business-use percentage is 75 percent? (Ignore any possible bonus depreciation.) (Use Exhibit 10-10.)

		$5,500.
		$4,250.
		$8,250.
		$7,500.
		None of the choices are correct.

1. Crouch LLC placed in service on May 19, 2019, machinery and equipment (seven-year property) with a basis of $3,200,000. Assume that Crouch has sufficient income to avoid any limitations. Calculate the maximum depreciation deduction including §179 expensing (but ignoring bonus depreciation). (Use MACRS Table 1.)

   		$370,000.
   		$457,280.
   		$1,020,000.
   		$774,407.
   		None of the choices are correct.

Answer 1

1. A luxury auto's maximum depreciation in the first year is the lesser of $10,000 or
its MACRS amount of $11,000 ($55,000 × 20%). That amount is then multiplied by the
business-use percentage to obtain $7,500 ($10,000 × 75%).

4rth is the correct answer $7,500

2. The $1,020,000 §179 expense is reduced to $370,000 because of the
property placed in service limitation ($3,200,000 − $2,550,000 threshold). The half-year
convention applies. The expense is $774,407, which is depreciation of $2,830,000 ×
0.1429 = $404,407 plus $370,000 of §179 expense.

4rth is the correct answer $7,74,407