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.)

b. The vehicle cost $88,000, and business use is 100 percent.

c. The vehicle cost $88,000, and she used it 80 percent for business.

d. The vehicle cost $88,000, and she used it 80 percent for business. She sold it on March 1 of year 2.

e. The vehicle cost $88,000, and she used it 20 percent for business.

f. The vehicle cost $88,000, and is an SUV that weighs 6,500 pounds. Business use was 100 percent.

Answer 1

ANSWERS:

Requirement b) The vehicle cost $88,000, and business use is 100 percent.

Particulars	2019	2020
Original Cost (A)	88,000	88,000
MACR's Depreciation rate, for 5 Year, Half year convention (B)	20%	32%
Full MACRS depreciation expense (C = A * B)	17,600	28,160
Maximum auto depreciation as per 2018 rule (D)	10,000	16,000
Lower of C or D at 100% business use	10,000	16,000
Business use percent	100%	100%
Maximum Depreciation deduction for year	10,000	16,000

Requirement c)The vehicle cost $88,000, and she used it 80 percent for business.

Particulars	2019	2020
Original Cost (A)	88,000	88,000
MACR's Depreciation rate, for 5 Year, Half year convention (B)	20%	32%
Full MACRS depreciation expense (C = A * B)	17,600	28,160
Maximum auto depreciation	10,000	16,000
Lower of C or D at 100% business use	10,000	16,000
Business use percent	80%	80%
Maximum Depreciation deduction for year	8,000	12,800

Requirement d) The vehicle cost $88,000, and she used it 80 percent for business. She sold it on March 1 of year 2

Particulars	2019	2020
Original Cost (A)	88,000	88,000
MACR's Depreciation rate, for 5 Year, Half year convention (B)	20%	32%
Full MACRS depreciation expense (C = A * B)	17,600	28,160
Maximum auto depreciation as per 2018 rule (D)	10,000	16,000
Lower of C or D at 100% business use	10,000	16,000
Partial year	100%	50%
Depreciation deduction for year	10,000	8,000
Business use percent	80%	80%
Maximum Depreciation deduction for year	8,000	6,400

Requirement e) The vehicle cost $88,000, and she used it 20 percent for business.

Particulars	2019	2020
Original Cost (A)	88,000	88,000
MACR's Depreciation rate, for 5 Year, Half year convention (B)	20%	32%
Full MACRS depreciation expense (C = A * B)	17,600	28,160
Maximum auto depreciation as per 2018 rule (D)	10,000	16,000
Lower of C or D at 100% business use	10,000	16,000
Business use percent	20%	20%
Maximum Depreciation deduction for year	2,000	3,200

Requirement f) The vehicle cost $88,000, and is an SUV that weighs 6,500 pounds. Business use was 100 percent.

Particulars	2019	2020
Original Cost (A)	88,000	N/A
Section 179 expense (Maximum Section 179 expense for SUV) (B)	25,500	N/A
Depreciable basis (C = A - B)	62,500	62,500`
MACRS depreciation rate (D)	20%	32%
Full MACRS depreciation expense (E = C * D)	12,500	20,000
Depreciation deduction in including section 179 expense for year (B + E)	38,000	20,000