Question

Required Information The following Information applies to the questions displayed below.] 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.) a. The vehicle cost $30.000 and business use is 100 percent (Ignore $179 expense). Year Depreciation deduction 2019 2020

Answer 1

Original purchase price of car : $ 30,000/-

Depreciation using General depreciation system

Depreciation in 1st Year (2019) =
= Cost ×	1	× utilization level × Depreciation Convention
	Useful Life

= 30,000 ×	1	× 100% × ½ (Half year convention)
	10
= $ 1500

Depreciation in 2nd Year (2020) =
= (Cost – Depreciation allowed in 1st Year)	× 1/ Recovery rate × Utilizing Level

= (30,000-1500) × 1/10 × 100%    = $ 2850