Question

During the year, AAA acquired the following assets (all assets were placed in service on the acquisition dates as indicated below):

Service vans-new (not Luxury Automobiles) July 1, 2018 $500,000

Plumbing machinery/equipment-new July 1, 2018 $250,000

AAA did not claim Section 179 expense for any of the current year asset additions and has opted out of bonus depreciation for 3 and 5- year recovery period assets.

Fill out IRS Form 4562

Answer 1

Bonus Depreciation is also called as Special depreciation allowance which shall be filled in Part II of form 4562.

We can not fill Part II of Form 4562 in case of the following conditions:

• if the Property is not “eligible property.” only new property and not pre-owned property are eligible.
• “Listed property,” which is defined under Part V of the form 4562.

Now let's analyze our example wherein both the assets are acquired during the year means these are the new assets.

however, the service van is covered under list V of Form 4562 and therefore is not allowed to fill under part II of form 4562.

Hence 50% of plumbing machinery/equipment (50% of $250,000) $125,000 shall be reported in line 14 of below snapshot for the part II of form 4562.