Question

During 2019, William purchases the following capital assets for use in his catering business: New passenger automobile (September 30) $58,200 Baking equipment (June 30) 17,460 Assume that William decides to use the election to expense on the baking equipment (and has adequate taxable income to cover the deduction) but not on the automobile (which has a 5-year recovery period), and he also uses the MACRS accelerated method to calculate depreciation but elects out of bonus depreciation. Assume he has adequate taxable income. Click here to access the depreciation table and click here to access the annual automobile depreciation limitations. Calculate William's maximum depreciation deduction for 2019, assuming he uses the automobile 100 percent in his business. $

Answer 1

Given Information:
1. Baking equipment purchased on June 30, 2019 at $ 17,460
2. New passenger automobile purchased on September 30, 2019 at $ 58,200
The baking equipment will be expensed with full amount of $ 17,460, It won't be depreciated.
The automobile was purchased during september, 2019 , Therefore william can use half year convention, using a MACRS 5 years class property
Maximum Depreciation can be 20% of the automobile value
i.e., $58,200 x 20% =	$ 11,640
Working Note:
MACRS 5 year class property- Half year convention:-
Year	Depreciation rate (%)	Depreciation Amount
1	20%	11,640.00
2	32%	18,624.00
3	19.20%	11,174.40
4	11.52%	6,704.64
5	11.52%	6,704.64
6	5.76%	3,352.32