Question

Answer the following questions:

You buy an escalade in 2018 for $80,000. Luxury automobiles have a depreciation ceiling in year 1 of $10,000. Vehicles are 5-year property. You use this vehicle 75% for business. Assume half-year convention. You do not take any section 179 or bonus depreciation. What is the allowable depreciation deduction for 2018?

10,000

12,000

7,500

16,000

A self-employed taxpayer acquires the following 5-year assets:

Date In-Service                       Acquisition Cost

Feb 16^th                                   $85,000

May 2^nd                                   $208,000

December 5^th                          $665,000

Calculate the depreciation specifically for the asset purchased Feb 16^th .Assume no bonus depreciation or Section 179 deductions are used.

4,250

29,750

17,000

85,000

A taxpayer is moving across the country in 2018 when his UHaul moving truck is stolen. His belongs had a basis of around $35,000. FMV is tough to calculate, but he spent around $28,000 replacing the lost items in his new home. Speaking of which, his new home was destroyed a month later in an earthquake. A federal disaster area was declared for the earthquake. The basis of the home was $100,000 and since it was just purchased the FMV of the home was also $100,000. The insurance reimbursement was $90,000 for the items destroyed in the earthquake. There was no insurance reimbursement for the theft. Before the AGI limitation, what is the taxpayer’s casualty loss amount?

9,900

10,000

37,800

44,800

45,000

You buy a 7-year machine for $20,000 in 2018. Assume this qualifies for half-year convention. You do not take any section 179 deductions. You do decide to take the available bonus depreciation for 2018. What is the total depreciation allowed for this machine? Assume half-year convention.

2,858

10,000

11,429

12,000

20,000

Answer 1

1	Half year convention
	5 years property
	Rate for year 1	20%
	Cost	$80,000
	Depreciation for year 1	$16,000
	75% depreciation for business use	$12,000
	Depreciation ceiling	$10,000
	Allowable depreciation deduction	$10,000
2	Date in Service	Feb 16th
	Cost	$85,000
	Mid quarter convention
	5 years property
	Rate for Year 1	35%
	Depreciation for year 1	$29,750
3	Calculation of casualty loss
	Adjusted basis of belongings	$35,000
	Less: $100 reduction	100
	Casualty loss	34,900
	Adjusted basis of new home	$100,000
	Less: Insurance reimbursement	$90,000
	Loss	$10,000
	Less: $100 reduction for personal property	$100
	Casualty loss	$9,900
	Total casualty loss	44,800
4	Half year convention
	7 year property
	Cost	$20,000
	Bonus depreciation @ 50%	$10,000
	Depreciation for Year 1 @14.29% on $10000	$1,429
	Total Depreciation allowed	$11,429