Lina purchased a new car for use in her business during 2019. The auto was the...
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.)
Table 1 MACRS Half-Year Convention
| Depreciation Rate for Recovery Period | ||||||
|---|---|---|---|---|---|---|
| 3-Year | 5-Year | 7-Year | 10-Year | 15-Year | 20-Year | |
| Year 1 | 33.33% | 20.00% | 14.29% | 10.00% | 5.00% | 3.750% |
| Year 2 | 44.45 | 32.00 | 24.49 | 18.00 | 9.50 | 7.219 |
| Year 3 | 14.81 | 19.20 | 17.49 | 14.40 | 8.55 | 6.677 |
| Year 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.70 | 6.177 |
| Year 5 | 11.52 | 8.93 | 9.22 | 6.93 | 5.713 | |
| Year 6 | 5.76 | 8.92 | 7.37 | 6.23 | 5.285 | |
| Year 7 | 8.93 | 6.55 | 5.90 | 4.888 | ||
| Year 8 | 4.46 | 6.55 | 5.90 | 4.522 | ||
| Year 9 | 6.56 | 5.91 | 4.462 | |||
| Year 10 | 6.55 | 5.90 | 4.461 | |||
| Year 11 | 3.28 | 5.91 | 4.462 | |||
| Year 12 | 5.90 | 4.461 | ||||
| Year 13 | 5.91 | 4.462 | ||||
| Year 14 | 5.90 | 4.461 | ||||
| Year 15 | 5.91 | 4.462 | ||||
| Year 16 | 2.95 | 4.461 | ||||
| Year 17 | 4.462 | |||||
| Year 18 | 4.461 | |||||
| Year 19 | 4.462 | |||||
| Year 20 | 4.461 | |||||
| Year 21 | 2.231 | |||||
TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter
| Depreciation Rate for Recovery Period | ||
|---|---|---|
| 5-Year | 7-Year | |
| Year 1 | 35.00% | 25.00% |
| Year 2 | 26.00 | 21.43 |
| Year 3 | 15.60 | 15.31 |
| Year 4 | 11.01 | 10.93 |
| Year 5 | 11.01 | 8.75 |
| Year 6 | 1.38 | 8.74 |
| Year 7 | 8.75 | |
| Year 8 | 1.09 | |
TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter
| Depreciation Rate for Recovery Period | ||
|---|---|---|
| 5-Year | 7-Year | |
| Year 1 | 25.00% | 17.85% |
| Year 2 | 30.00 | 23.47 |
| Year 3 | 18.00 | 16.76 |
| Year 4 | 11.37 | 11.97 |
| Year 5 | 11.37 | 8.87 |
| Year 6 | 4.26 | 8.87 |
| Year 7 | 8.87 | |
| Year 8 | 3.34 | |
TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter
| Depreciation Rate for Recovery Period | ||
|---|---|---|
| 5-Year | 7-Year | |
| Year 1 | 15.00% | 10.71% |
| Year 2 | 34.00 | 25.51 |
| Year 3 | 20.40 | 18.22 |
| Year 4 | 12.24 | 13.02 |
| Year 5 | 11.30 | 9.30 |
| Year 6 | 7.06 | 8.85 |
| Year 7 | 8.86 | |
| Year 8 | 5.53 | |
TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter
| Depreciation Rate for Recovery Period | ||
|---|---|---|
| 5-Year | 7-Year | |
| Year 1 | 5.00% | 3.57% |
| Year 2 | 38.00 | 27.55 |
| Year 3 | 22.80 | 19.68 |
| Year 4 | 13.68 | 14.06 |
| Year 5 | 10.94 | 10.04 |
| Year 6 | 9.58 | 8.73 |
| Year 7 | 8.73 | |
| Year 8 | 7.64 | |
EXHIBIT 10-10 Automobile Depreciation Limits
| Year Placed in Service | ||||
|---|---|---|---|---|
| 2019* | 2018 | 2017 | 2016 | |
| Recovery Year 1 | 10,000** | 10,000* | 3,160* | 3,160* |
| Recovery Year 2 | 16,000 | 16,000 | 5,100 | 5,100 |
| Recovery Year 3 | 9,600 | 9,600 | 3,050 | 3,050 |
| Recovery Year 4 and after | 5,760 | 5,760 | 1,875 | 1,875 |
*As of press date, the IRS had not released the 2019 limitations
for automobiles, so throughout the chapter we use the same
limitations as in 2018 for 2019.
**$8,000 additional depreciation is allowed when bonus depreciation
is claimed [§168(k)(2)(F)].
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 |
e. The vehicle cost $80,000, and she used it 20 percent for business.
| Year | Depreciation deduction |
| 2019 | |
| 2020 |
f. The vehicle cost $80,000 and is an SUV that weighs 6,500 pounds. Business use was 100 percent.
| Year | Depreciation deduction |
| 2019 | |
| 2020 |
Homework Answers
Part D
|
Description |
2019 |
2020 |
Explanation |
|
(1) Original basis of auto |
80000 |
80000 |
Assumed in problem |
|
(2) MACRS depreciation rate |
20% |
32% |
5-yr prop, yr. 1, ½ yr. convention |
|
(3) Full MACRS depreciation expense |
16000 |
25600 |
(1) x (2) |
|
(4) Maximum auto depreciation |
18100 |
16100 |
|
|
(5)Depreciation deduction for year based on 100% business use |
18100 |
16100 |
Lesser of (3) or (4) |
|
(6) Partial year |
50% |
Half year of depreciation |
|
|
(7) Depreciation deduction for year |
8050 |
||
|
(6) Business use percentage |
80% |
80% |
|
|
Depreciation deduction for year |
$9050 |
$4025 |
Part E
|
Description |
2019 |
2020 |
Explanation |
|
(1) Original basis of auto |
80000 |
80000 |
Assumed in problem |
|
(2) MACRS (Straight-line) depreciation rate |
10% |
20% |
5-yr prop, yr. 1, ½ yr. convention |
|
(3) Full MACRS depreciation expense |
8000 |
16000 |
(1) x (2) |
|
(4) Maximum auto depreciation |
18100 |
16100 |
|
|
(5)Depreciation deduction for year based on 100% business use |
8000 |
16000 |
Lesser of (3) or (4) |
|
(6) Business use percentage |
20% |
20% |
|
|
Depreciation deduction for year |
$1600 |
$3200 |
(5) X (6) |
Part F
|
Description |
2019 |
2020 |
Explanation |
|
(1) Original basis of auto |
80000 |
N/A |
Assumed in problem |
|
(2) Section 179 expense |
25000 |
N/A |
|
|
(3) depreciable basis |
55000 |
55000 |
(1) - (2) |
|
(4) MACRS depreciation rate |
20% |
32% |
5-yr prop, yr. 1, ½ yr. convention |
|
(5) Full MACRS depreciation expense |
11000 |
17600 |
(3) x (4) |
|
Depreciation deduction in including section 179 expense for year |
36000 |
17600 |
(2) + (5) |
Add Answer to:
Lina purchased a new car for use in her business during 2019. The auto was the...
Lina purchased a new car for use in her business during 2019. The auto was the...
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...
Lina purchased a new car for use in her business during 2019. The auto was the...
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) a. The vehicle cost $$31,600 and business use is 100 percent...
Required information [The following information applies to the questions displayed below.] Lina purchased a new car...
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):...
Required information [The following information applies to the questions displayed below.] Lina purchased a new car...
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):...
. EXHIBIT 10-10 Automobile Depreciation Limits Year Placed in Service 2019* 2018 2017 2016 Recovery Year...
.
EXHIBIT 10-10 Automobile Depreciation
Limits
Year Placed in
Service
2019*
2018
2017
2016
Recovery Year 1
10,000**
10,000*
3,160*
3,160*
Recovery Year 2
16,000
16,000
5,100
5,100
Recovery Year 3
9,600
9,600
3,050
3,050
Recovery Year 4 and after
5,760
5,760
1,875
1,875
TABLE 2a MACRS Mid-Quarter Convention: For
property placed in service during the first quarter
Depreciation Rate for
Recovery Period
5-Year
7-Year
Year 1
35.00%
25.00%
Year 2
26.00
21.43
Year 3
15.60
15.31
Year 4
11.01...
Assume that ACW Corporation has 2018 taxable income of $1,020,000 for purposes of computing the §179...
Assume that ACW Corporation has 2018 taxable income of $1,020,000 for purposes of computing the §179 expense. The company acquired the following assets during 2018 (assume no bonus depreciation): (Use MACRS Table 1, Table 2, and Table 5). Assume that the qualified improvement property has satisfied the conditions mentioned under Section 179(f)(2) Asset Placed in Service Basis Machinery Computer equipment Delivery truck Qualified improvement property Total 12-Sep 10-Feb 21-Aug 2-Apr $ 472,000 72,800 95,000 1,382,000 $2,021,000 a. What is the...
Evergreen Corporation (calendar-year-end) acquired the following assets during the current year: (ignore §179 expense and bonus...
Evergreen Corporation (calendar-year-end) acquired the following assets during the current year: (ignore §179 expense and bonus depreciation for this problem): (Use MACRS Table 1 and Table 2.) Date Placed Original Asset in Service Basis Machinery October 25 $ 112,000 Computer equipment February 3 41,500 Used delivery truck* August 17 54,500 Furniture April 22 202,500 *The delivery truck is not a luxury automobile. b. What is the allowable MACRS depreciation on Evergreen’s property in the current year if Evergreen does not...
On April 5, 2019, Kinsey places in service a new passenger automobile that cost $60,000. The...
On April 5, 2019, Kinsey places in service a new passenger automobile that cost $60,000. The car is used 100% for business in each tax year. Kinsey uses the MACRS 200% declining-balance method of cost recovery (the auto is a 5-year asset). Assume Kinsey elects any available additional first-year depreciation. The maximum depreciation allowed for 2019 is $ 12000 X and for 2020 is S 16000 20 5 Hint(s) EXHIBIT 8.4 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention...
On May 12 of year 1, Javier purchased a building, including the land it was on,...
On May 12 of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,495,000; $450,000 was allocated to the basis of the land and the remaining $1,045,000 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) C. Assume the...
Erwin Company, a calendar year taxpayer, made only two purchases of depreciable personalty this year. The first purchase...
Erwin Company, a calendar year taxpayer, made only two purchases
of depreciable personalty this year. The first purchase was
five-year recovery property costing $312,800, and the second
purchase was seven-year recovery property costing $574,000. Use
Table 7-2 and Appendix 7-A.
Compute Erwin’s first-year MACRS depreciation with respect to
the personalty assuming that the first purchase occurred on
February 2, and the second purchase occurred on June 18.
Compute Erwin’s first-year MACRS depreciation with respect to
the personalty assuming that the...
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):...
.
EXHIBIT 10-10 Automobile Depreciation
Limits
Year Placed in
Service
2019*
2018
2017
2016
Recovery Year 1
10,000**
10,000*
3,160*
3,160*
Recovery Year 2
16,000
16,000
5,100
5,100
Recovery Year 3
9,600
9,600
3,050
3,050
Recovery Year 4 and after
5,760
5,760
1,875
1,875
TABLE 2a MACRS Mid-Quarter Convention: For
property placed in service during the first quarter
Depreciation Rate for
Recovery Period
5-Year
7-Year
Year 1
35.00%
25.00%
Year 2
26.00
21.43
Year 3
15.60
15.31
Year 4
11.01...
Assume that ACW Corporation has 2018 taxable income of $1,020,000 for purposes of computing the §179 expense. The company acquired the following assets during 2018 (assume no bonus depreciation): (Use MACRS Table 1, Table 2, and Table 5). Assume that the qualified improvement property has satisfied the conditions mentioned under Section 179(f)(2) Asset Placed in Service Basis Machinery Computer equipment Delivery truck Qualified improvement property Total 12-Sep 10-Feb 21-Aug 2-Apr $ 472,000 72,800 95,000 1,382,000 $2,021,000 a. What is the...
On April 5, 2019, Kinsey places in service a new passenger automobile that cost $60,000. The car is used 100% for business in each tax year. Kinsey uses the MACRS 200% declining-balance method of cost recovery (the auto is a 5-year asset). Assume Kinsey elects any available additional first-year depreciation. The maximum depreciation allowed for 2019 is $ 12000 X and for 2020 is S 16000 20 5 Hint(s) EXHIBIT 8.4 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention...
On May 12 of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,495,000; $450,000 was allocated to the basis of the land and the remaining $1,045,000 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.) C. Assume the...
Erwin Company, a calendar year taxpayer, made only two purchases
of depreciable personalty this year. The first purchase was
five-year recovery property costing $312,800, and the second
purchase was seven-year recovery property costing $574,000. Use
Table 7-2 and Appendix 7-A.
Compute Erwin’s first-year MACRS depreciation with respect to
the personalty assuming that the first purchase occurred on
February 2, and the second purchase occurred on June 18.
Compute Erwin’s first-year MACRS depreciation with respect to
the personalty assuming that the...
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