Lina purchased a new car for use in her business during 2021. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2021 and 2022 (Lina doesn’t want to take bonus depreciation for 2021 or 2022) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) a. The vehicle cost $39,000, and business use is 100 percent (ignore §179 expense).YearDepreciation Deduction2021 2022 b. The vehicle cost $80,800, and business use is 100 percent.YearDepreciation Deduction2021 2022 c. The vehicle cost $80,800, and she used it 80 percent for business.YearDepreciation Deduction2021 2022 d. The vehicle cost $80,800, and she used it 80 percent for business. She sold it on March 1 of year 2.YearDepreciation Deduction2021 2022 e. The vehicle cost $80,800, and she used it 20 percent for business.YearDepreciation Deduction2021 2022 f. The vehicle cost $80,800, and it is an SUV that weighs 6,500 pounds. Business use was 100 percent. Table 1 MACRS Half-Year ConventionDepreciation Rate for Recovery Period 3-Year5-Year7-Year10-Year15-Year20-YearYear 1 33.33% 20.00% 14.29% 10.00% 5.00% 3.750%Year 2 44.4532.0024.4918.009.507.219Year 3 14.8119.2017.4914.408.556.677Year 4 7.4111.5212.4911.527.706.177Year 5 11.52 8.93 9.226.935.713Year 6 5.76 8.92 7.376.235.285Year 7 8.93 6.555.904.888Year 8 4.46 6.555.904.522Year 9 6.565.914.462Year 10 6.555.904.461Year 11 3.285.914.462Year 12 5.904.461Year 13 5.914.462Year 14 5.904.461Year 15 5.914.462Year 16 2.954.461Year 17 4.462Year 18 4.461Year 19 4.462Year 20 4.461Year 21 2.231 EXHIBIT 10-10 Automobile Depreciation LimitsRecoveryYearYear Placed in Service2021*10,100**16,10020202019201810,000**16,0009,600110,100**16,1009,7005,76010,100**16,1009,7005,760239,7004 and after5,7605,760*As of press date, the IRS had not released the 2021 limitations for automobiles, so throughout the chapter we use the same limitations as in 2020 for 2021.**$8,000 additional depreciation is allowed when bonus depreciation is claimed [§168(k)(2)(F)]. TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarterDepreciation Rate for Recovery Period5-Year7-YearYear 135.00%25.00%Year 226.0021.43Year 315.6015.31Year 411.0110.93Year 511.018.75Year 61.388.74Year 78.75Year 81.09TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarterDepreciation Rate for Recovery Period5-Year7-YearYear 125.00%17.85%Year 230.0023.47Year 318.0016.76Year 411.3711.97Year 511.378.87Year 64.268.87Year 78.87Year 83.34TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarterDepreciation Rate for Recovery Period5-Year7-YearYear 115.00%10.71%Year 234.0025.51Year 320.4018.22Year 412.2413.02Year 511.309.30Year 67.068.85Year 78.86Year 85.53TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarterDepreciation Rate for Recovery Period5-Year7-YearYear 15.00%3.57%Year 238.0027.55Year 322.8019.68Year 413.6814.06Year 510.9410.04Year 69.588.73Year 78.73Year 87.64

MACRS stands for modified accelerated cost recovery system which is a system of depreciation and it…

Answered: Lina purchased a new car for use in her…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Lina purchased a new car for use in her business during 2021. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2021 and 2022 (Lina doesn’t want to take bonus depreciation for 2021 or 2022) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.)

a. The vehicle cost $39,000, and business use is 100 percent (ignore §179 expense).

Year	Depreciation Deduction
2021
2022

b. The vehicle cost $80,800, and business use is 100 percent.

Year	Depreciation Deduction
2021
2022

c. The vehicle cost $80,800, and she used it 80 percent for business.

Year	Depreciation Deduction
2021
2022

d. The vehicle cost $80,800, and she used it 80 percent for business. She sold it on March 1 of year 2.

Year	Depreciation Deduction
2021
2022

e. The vehicle cost $80,800, and she used it 20 percent for business.

Year	Depreciation Deduction
2021
2022

f. The vehicle cost $80,800, and it is an SUV that weighs 6,500 pounds. Business use was 100 percent.

Table 1 MACRS Half-Year Convention

Depreciation Rate for Recovery Period
	3-Year	5-Year	7-Year	10-Year	15-Year	20-Year
Year 1	33.33%	20.00%	14.29%	10.00%	5.00%	3.750%
Year 2	44.45	32.00	24.49	18.00	9.50	7.219
Year 3	14.81	19.20	17.49	14.40	8.55	6.677
Year 4	7.41	11.52	12.49	11.52	7.70	6.177
Year 5		11.52	8.93	9.22	6.93	5.713
Year 6		5.76	8.92	7.37	6.23	5.285
Year 7			8.93	6.55	5.90	4.888
Year 8			4.46	6.55	5.90	4.522
Year 9				6.56	5.91	4.462
Year 10				6.55	5.90	4.461
Year 11				3.28	5.91	4.462
Year 12					5.90	4.461
Year 13					5.91	4.462
Year 14					5.90	4.461
Year 15					5.91	4.462
Year 16					2.95	4.461
Year 17						4.462
Year 18						4.461
Year 19						4.462
Year 20						4.461
Year 21						2.231

EXHIBIT 10-10 Automobile Depreciation Limits
Recovery
Year
Year Placed in Service
2021*
10,100**
16,100
2020
2019
2018
10,000**
16,000
9,600
1
10,100**
16,100
9,700
5,760
10,100**
16,100
9,700
5,760
2
3
9,700
4 and after
5,760
5,760
*As of press date, the IRS had not released the 2021 limitations for automobiles, so throughout the chapter we use the same limitations as in 2020 for 2021.
**$8,000 additional depreciation is allowed when bonus depreciation is claimed [§168(k)(2)(F)].

TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter
Depreciation Rate for Recovery Period
5-Year
7-Year
Year 1
35.00%
25.00%
Year 2
26.00
21.43
Year 3
15.60
15.31
Year 4
11.01
10.93
Year 5
11.01
8.75
Year 6
1.38
8.74
Year 7
8.75
Year 8
1.09
TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter
Depreciation Rate for Recovery Period
5-Year
7-Year
Year 1
25.00%
17.85%
Year 2
30.00
23.47
Year 3
18.00
16.76
Year 4
11.37
11.97
Year 5
11.37
8.87
Year 6
4.26
8.87
Year 7
8.87
Year 8
3.34
TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter
Depreciation Rate for Recovery Period
5-Year
7-Year
Year 1
15.00%
10.71%
Year 2
34.00
25.51
Year 3
20.40
18.22
Year 4
12.24
13.02
Year 5
11.30
9.30
Year 6
7.06
8.85
Year 7
8.86
Year 8
5.53
TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter
Depreciation Rate for Recovery Period
5-Year
7-Year
Year 1
5.00%
3.57%
Year 2
38.00
27.55
Year 3
22.80
19.68
Year 4
13.68
14.06
Year 5
10.94
10.04
Year 6
9.58
8.73
Year 7
8.73
Year 8
7.64

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.