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Lina purchased a new car for use in her business during 2017. 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 2017 and 2018 (Lina doesn’t want to take bonus depreciation for 2017 or 2018) in the following alternative scenarios (assuming half-year convention for all) Exhibit 10-8 (Use MACRS Table 1, Table 2.):

d. The vehicle cost $46,000, and she used it 80 percent for business. She sold it on March 1 of year 2.

e. The vehicle cost $46,000, and she used it 20 percent for business.

f. The vehicle cost $46,000, and is an SUV that weighed 6,500 pounds. Business use was 100 percent.

Answer 1

Answer:

d. Calculation of depreciation deduction;

Description	Amount
Cost of Auto	$ 46000
MACRS Dep. Rate	32%
Full MACRS Dep. Expense	$14720
Maximum auto depreciation	$5100
Dep. for entire year(lower of 9200 and 5100)	$5100
Partial Year	50%
Dep. Deduction for Year	$ 2550
Business use %	80%
Dep. Deduction for year	$2040

e. Calculation of Depreciation Deduction

Description	2017	2018
Cost of Auto	$46000	$46000
MACRS (straight line) Dep. Rate	10%	20%
Full MACRS Dep. Expenses	$4600	$9200
Maximum auto Dep.	$3160	$5100
Dep. Deduction for year	$ 3160	$5100
Business use %	20%	20%
Dep. Deduction for year	$632	$1020

f. Calculation of Depreciation Expense

Description	2017	2018
Cost of auto	$46000	NA
Section 179 Expense	$25000	NA
Depreciable basis	$21000	$21000
MACRS Dep. Rate	20%	32%
Full MACRS Dep. Expense	$4200	$6720
Dep. Deduction including section 179 expense for year	$29200	$6720