During 2014, William purchases the following capital assets for use in his cater

Question

During 2014, William purchases the following capital assets for use in his catering business:

Assume that William decides to use the election to expense on the baking equipment but not on the automobile (which has a 5-year recovery period), and he also uses the MACRS accelerated method to calculate depreciation. Assume he has adequate taxable income. Click here to access the depreciation table and click here to access the annual automobile depreciation limitations.

Calculate William's maximum depreciation deduction for 2014, assuming he uses the automobile 100 percent in his business.

New passenger automobile (September 30) $44,800 Baking equipment (June 30) 13,440

Explanation / Answer

ACRS Rates--Mid-Quarter Convention--Third Quarter

Total Depreciation in 2014 = $ 12,320.45

Year 5 years Depreciation amount 2014 15%                                  6,720 2015 34%                                15,232 2016 20.40%                                  9,139 2017 12.24%                                  5,484 2018 11.30%                                  5,062 2019 7.06%                                  3,163 Asset value             44,800

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