During 2015, William purchases the following capital assets for use in his cater
ID: 2481121 • Letter: D
Question
During 2015, 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 (and has adequate taxable income to cover the deduction) but not on the automobile (which has a 5-year recovery period), and he also uses the MACRS accelerated method to calculate depreciation but elects out of bonus depreciation.
Click here to access the depreciation table and click here to access the annual automobile depreciation limitations. Assume 2015 depreciation limits remain in place on luxury automobiles.
Calculate William's maximum depreciation deduction for 2015, assuming he uses the automobile 100 percent in his business.
New passenger automobile (September 30) $21,500 Baking equipment (June 30) 6,500Explanation / Answer
On september 30 2015, william bought and placed in service a new passenger car for $21,500. william used the car only in his business. william. does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Under MACRS, a car is 5-year property. Since William placed his car in service on September 30 and used it only for business, willaim uses the percentages MACRS depreciation on the car. william multiplies the $21,500 unadjusted basis of her car by 0.20 to get her MACRS depreciation of $4,300 for 2015. This $4,300 is above the luxury automobile limitation depreciation deduction of $3,160 for passenger automobiles placed in service in 2015. She can claim maximun of $3,160
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