Scott Tire Co. began operations January 1, 2012. Keith, the sole proprietor, pur
ID: 2519065 • Letter: S
Question
Scott Tire Co. began operations January 1, 2012. Keith, the sole proprietor, purchased a building, land, and one piece of machinery in the first year of operations. In the current year, Keith purchased two additional pieces of equipment, and a tow-truck. Keith wants to maximize his depreciation deduction this year.
Use the following information to complete a Depreciation Worksheet and then prepare a Form 4562 for the current year for Scott Tire Co. (EIN# 25-6183786) which is owned by Keith. Be sure and read the additional information below.
Asset Date Acquired MACRS Life Purchase Price
Machine A 1/15/2012 5 years $30,000
Non-residential Building 1/31/2013 39 years $205,000
Land 2/15/2012 $55,000
Equipment A 06/1/2016 7 years $35,000
Equipment B 11/1/2017 5 years $25,000
Tow Truck A 12/1/2017 5 years $22,000
Scott Tire Co.’s Net Profit on Schedule C (before any depreciation) is $55,000.
ADDITIONAL INFORMATION
1. All the properties were used 100% of the time in the business.
2. ASSUME that NO BONUS or ADDITIONAL depreciation is taken other than Section 179 depreciation. Assume also that NO SPECIAL ELECTIONS were made regarding real property.
3. The ENDING amount is the beginning balance in the accumulated depreciation plus the current year plus any Sec. 179 amount for the current year. The beginning balance for all the assets will not be zero because they were not all purchased during the current year. For assets purchased in a previous year, you will need to calculate the beginning balance.
4. Most of the numbers that appear on the Form 4562 will come directly from the Depreciation Worksheet. The amount of MACRS deductions for assets placed in service before the CY
Explanation / Answer
Asset
Date Acquired
MACRS Life
Purchase price
Year of charge
Basis
MACRS %
Depreciation
Machine A
15-Jan-2014
5 years
$30,000
3rd year
First quarter
15.600%
$4,680.000
Non-Residential Building
31-Jan-2014
39 years
$205,000
3rd year
Yearly
2.564%
$5,256.20
Land
15-Feb-2014
$55,000
Equipment A
1-Jun-2016
7 years
$35,000
1st year
Second quarter
17.850%
$6,247.50
Equipment B
1-Nov-2016
5 years
$25,000
1st year
Fourth quarter
5.000%
$1,250.00
Tow Truck A
1-Dec-2016
5 years
$22,000
1st year
Fourth quarter
5.000%
$1,100.00
Total
$18,533.700
Asset
Date Acquired
MACRS Life
Purchase price
Year of charge
Basis
MACRS %
Depreciation
Machine A
15-Jan-2014
5 years
$30,000
3rd year
First quarter
15.600%
$4,680.000
Non-Residential Building
31-Jan-2014
39 years
$205,000
3rd year
Yearly
2.564%
$5,256.20
Land
15-Feb-2014
$55,000
Equipment A
1-Jun-2016
7 years
$35,000
1st year
Second quarter
17.850%
$6,247.50
Equipment B
1-Nov-2016
5 years
$25,000
1st year
Fourth quarter
5.000%
$1,250.00
Tow Truck A
1-Dec-2016
5 years
$22,000
1st year
Fourth quarter
5.000%
$1,100.00
Total
$18,533.700
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.