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.)

1.The vehicle cost $82,000, and she used it 20 percent for business.

2.The vehicle cost $82,000, and is an SUV that weighs 6,500 pounds. Business use was 100 percent.

Answer 1

ANSWER:

1.The vehicle cost $82,000, and she used it 20 percent for business.

Particulars	2019	2020
Original basis (A)	$82,000	$82,000
MACRS depreciation rate (B)	20%	32%
Full MACRS depreciation expense (C = A * B)	$16,400	$26,240
Maximum auto depreciation (D)	$10,000	$16,000
Lower of C or D at 100% business use	$10,000	$16,000
Business use percent	20%	20%
Depreciation deduction for year	$2,000	$3,200

2.The vehicle cost $82,000, and is an SUV that weighs 6,500 pounds. Business use was 100 percent.

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

Particulars	2019	2020
Original basis of car (A)	$82,000	N/A
Section 179 expense (Maximum Section 179 expense for SUV) (B)	$25,000	N/A
Depreciable basis (C = A - B)	$57,000	$57,000
MACRS depreciation rate (D)	20%	32%
Full MACRS depreciation expense (E = C * D)	$11,400	$18,240
Depreciation deduction in including section 179 expense for year (B + E)	$36,400	$18,240

The depreciation expense will be $36,400 for 2019 and $18,240 for 2020