Modified Accelerated Cost Recovery System (MACRS), Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.4, 8.5)

During 2018, Palo Fiero purchases the following property for use in his calendar year-end manufacturing business:

Item Date Acquired Cost Manufacturing equipment (7 year) June 2 $38,000 Office furniture September 15 5,400 Office computer November 18 3,800 Passenger automobile (used 90 percent for business) May 31 55,600 Warehouse April 23 Building 170,000 Land 135,000

Palo uses the accelerated depreciation method under MACRS, if available, and does not make the election to expense or take a bonus depreciation.

Use Form 4562 to report Palo's depreciation expense for 2018.

Enter all amounts as positive numbers. If required, round to the nearest dollar. If an amount is zero, enter "0".

(a) Classification of property Section B-Assets Placed in Service During 2018 Tax Year Using the General Depreciation System (c) Basis for depreciation (b) Month and year (business/investment (d) Recovery period (e) Convention (f) Method placed in service use only-see instructions) (9) Depreciation deduction 19a 3-year property b 5-year property c 7-year property d 10-year property e 15-year property f 20-year property g 25-year property h Residential rental 25 yrs. 27.5 yrs. MM S/L S/L S/L 27.5 yrs. MM property Nonresidential real 39 yrs. MM S/L property MM S/L Section C-Assets Placed in Service During 2018 Tax Year Using the Alternative Depreciation System 20a Class life S/L b 12-year C 30-year d 40-year 12 yrs. 30 yrs. 40 yrs. S/L S/L MM MM S /L Part IV Summary (See instructions.) 21 Listed property. Enter amount from line 28 ..... 22 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. Enter here and on the appropriate lines of your return. Partnerships and S corporations-see instructions... 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs .... Form 4562 (2018) Page 2 Part V Listed Property (Include automobiles, certain other vehicles, and property used for entertainment, recreation, or amusement.) Note: For any vehicle for which you are using the standard mileage rate or deducting lease expense, complete only 24a, 24b, columns (a) through (c) of Section A, all of Section B, and Section C if applicable. Section A-Depreciation and Other Information (Caution: See the instructions for limits for passenger automobiles.) 24a Do you have evidence to support the business/investment use claimed? Yes No 24b If "Yes," is the evidence written? Yes No (a) (e) (9) (h) Basis for Business/ depreciation Elected Type of property (list Date placed in investment Cost or other Depreciation (business/ Recovery period Method/ Convention section vehicles first) service use basis deduction investment 179 cost percentage use only) (1) 25 25 Special depreciation allowance for qualified listed property placed in service during the tax year and used more than 50% in a qualified business use. See instructions .......... 26 Property used more than 50% in a qualified business use: 27 Property used 50% or less in a qualified business use: % 28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1.......... 29 Add amounts in column (i), line 26. Enter here and on line 7, page 1.......... Section B-Information on Use of Vehicles Complete this section for vehicles used by a sole proprietor, partner, or other more than 5% owner," or related person. If you provided vehicles to your employees, first answer the questions in Section to see if you meet an exception to completing this section for those vehicles. (a) (b) (c) (d) (e) (1) (a) Classification of property Section B-Assets Placed in Service During 2018 Tax Year Using the General Depreciation System (c) Basis for depreciation (b) Month and year (business/investment (d) Recovery period (e) Convention (f) Method placed in service use only-see instructions) (9) Depreciation deduction 19a 3-year property b 5-year property c 7-year property d 10-year property e 15-year property f 20-year property g 25-year property h Residential rental 25 yrs. 27.5 yrs. MM S/L S/L S/L 27.5 yrs. MM property Nonresidential real 39 yrs. MM S/L property MM S/L Section C-Assets Placed in Service During 2018 Tax Year Using the Alternative Depreciation System 20a Class life S/L b 12-year C 30-year d 40-year 12 yrs. 30 yrs. 40 yrs. S/L S/L MM MM S /L Part IV Summary (See instructions.) 21 Listed property. Enter amount from line 28 ..... 22 Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. Enter here and on the appropriate lines of your return. Partnerships and S corporations-see instructions... 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs .... Form 4562 (2018) Page 2 Part V Listed Property (Include automobiles, certain other vehicles, and property used for entertainment, recreation, or amusement.) Note: For any vehicle for which you are using the standard mileage rate or deducting lease expense, complete only 24a, 24b, columns (a) through (c) of Section A, all of Section B, and Section C if applicable. Section A-Depreciation and Other Information (Caution: See the instructions for limits for passenger automobiles.) 24a Do you have evidence to support the business/investment use claimed? Yes No 24b If "Yes," is the evidence written? Yes No (a) (e) (9) (h) Basis for Business/ depreciation Elected Type of property (list Date placed in investment Cost or other Depreciation (business/ Recovery period Method/ Convention section vehicles first) service use basis deduction investment 179 cost percentage use only) (1) 25 25 Special depreciation allowance for qualified listed property placed in service during the tax year and used more than 50% in a qualified business use. See instructions .......... 26 Property used more than 50% in a qualified business use: 27 Property used 50% or less in a qualified business use: % 28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1.......... 29 Add amounts in column (i), line 26. Enter here and on line 7, page 1.......... Section B-Information on Use of Vehicles Complete this section for vehicles used by a sole proprietor, partner, or other more than 5% owner," or related person. If you provided vehicles to your employees, first answer the questions in Section to see if you meet an exception to completing this section for those vehicles. (a) (b) (c) (d) (e) (1)