Question

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Harris Corp. is a technology start-up currently in its second year of operations. The company didn’t purchase any assets this year but purchased the following assets in the prior year:

	Placed in
Asset	Service		Basis
Office equipment	August 14	$	13,200
Manufacturing equipment	April 15		100,000
Computer system	June 1		48,000
Total		$	161,200

Harris did not know depreciation was tax deductible until it hired an accountant this year and didn’t claim any depreciation deduction in its first year of operation. (Use MACRS Table 1 and Table 2.)

a. What is the maximum amount of depreciation deduction Harris Corp. can deduct in its second year of operation?

b. What is the basis of the office equipment at the end of the second year?

Answer 1

a.)	Asset	Class	Placed in service	Original basis= A	Dep rate=B	Depreciation(A x B)
	Office equipment	7 years	14-Aug	13,200	24.49%	3,233
	Manufacturing equipment	7 years	15-Apr	100,000	24.49%	24,490
	Computer system	5 years	01-Jun	48,000	32%	15,360
					Total dep	43,083
	Year 2 Depreciation	$ 43,083
b.)	Office equipment	Amount in $
	Basis	13,200
	Less: Depreciation Year 1	1,886	(13,200 x 14.29% )
	Less: Depreciation Year 2	3,233
	Basis at end of second year	8,081