Question

3)

ABC LLC placed the following assets into service during the taxable year. Determine the total MACRS depreciation to which ABC is entitled for the year assuming ABC does not elect 179 expensing and elects out of bonus depreciation (meaning no 179 or bonus)

FOR THE TAX YEAR 2019

ASSET	IN SERVICE DATE	LIFE	COST
Machinery	11/15/2019	7	13,000
Computer	2/21/2019	5	10,000
Furniture	07/19/2019	7	6,300

A) 1,189

B) 3,364

C) 4,639

D) 4,758

Answer 1

Based on the information available in the question, we can calculate the total MACRS depreciation as follows:-

Year 1
Asset	Original cost	Date placed in service	MACRS Asset Life(yrs)	MACRS Depreciation rate	MACRS cost recovery
Machinery	13,000	11/15/2019	7	3.57%	464
Computer	10,000	02/21/2019	5	35.00%	3,500
Furniture	6,300	07/19/2019	7	10.71%	675
				MACRS Cost Recovery	4,639

Please note that since the company has placed around 44.37%($13,000/$29,300) of assets during the last quarter of the year , we use the MACRS Mid quarter convention in calculating the MACRS Cost recovery. As such, based on the above calculation, the correct answer is Option C - $4,639.

Option A, Option B and Option D are incorrect based on the above calculations.

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