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Problem 7-12 Modified Accelerated Cost Recovery System (MACRS), Election to Expense, Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 7.4, 7.5, 7.6, 7.7)

During 2015, William purchases the following capital assets for use in his catering business:

New passenger automobile (September 30) $21,500 Baking equipment (June 30) 6,500

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. $

Problem 7-13 Modified Accelerated Cost Recovery System (MACRS), Listed Property (LO 7.4, 7.6)

On February 2, 2015, Alexandra purchases a personal computer for her home. The computer cost $2,800. Alexandra uses the computer 80 percent of the time in her accounting business, and the remaining 20 percent of the time for various personal uses. Calculate Alexandra's maximum depreciation deduction for 2015 for the computer, assuming half-year convention and she does not use bonus depreciation or make the election to expense.

Click here to access the depreciation table.

$

DEPRECIATION TABLE

TABLE 7.2

Accelerated Depreciation for Personal Property Assuming Half-Year Convention (For Property Placed in Service after December 31, 1986)
Recovery Year 3-Year (200% DB) 5-Year (200% DB) 7-Year (200% DB) 10-Year (200% DB) 15-Year (150% DB) 20-Year (150% DB) 1 33.33 20.00 14.29 10.00 5.00 3.750 2 44.45 32.00 24.49 18.00 9.50 7.219 3 14.81 * 19.20 17.49 14.40 8.55 6.677 4 7.41 11.52 * 12.49 11.52 7.70 6.177 5 11.52 8.93 * 9.22 6.93 5.713 6 5.76 8.92 7.37 6.23 5.285 7 8.93 6.55 * 5.90 * 4.888 8 4.46 6.55 5.90 4.522 9 6.56 5.91 4.462 * 10 6.55 5.90 4.461 11 3.28 5.91 4.462 12 5.90 4.461 13 5.91 4.462 14 5.90 4.461 15 5.91 4.462 16 2.95 4.461 17 4.462 18 4.461 19 4.462 20 4.461 21 2.231
*Switch to straight-line depreciation. ANNUAL AUTOMOBILE DEPRECIATION LIMITATIONS ANNUAL AUTOMOBILE DEPRECIATION LIMITATIONSAUTOMOBILES ACQUIRED IN 2015 2015 Auto Depreciation Year 1* $3,160 Year 2 $5,100 Year 3 $3,050 Year 4 (and subsequent years until fully depreciated) $1,875 *In recent years, Congress has approved $8,000 of additional bonus depreciation in the first year on autos. At the time we go to press, it is not known whether Congress will extend this form of bonus depreciation in 2015. Please check the Whittenburg companion website for updates.

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