Question

1. On May 3rd, 2017 Bob’s Bus Service purchases a used bus for $85,000. This was his only asset purchases for the year. Bob wishes to maximize his depreciation for the year. Ignoring any income limitations, how much depreciation can Bob claim related to the purchase of the buses?

2. On July 20, 2017, XYZ Inc. purchased a new airplane for $3,000,000. The airplane will not be used in commercial or contract carrying of passengers or freight (5 year life). This is the company’s only asset purchase of the year. XYZ Inc. wants to maximize its depreciation. Ignoring any income limitations, what amount of depreciation can XYZ Inc. can claim in 2017 related to the purchase of the airplane?

Answer 1

Here Bob's Bus Service had purchased a used bus for $85,000. As it is a used one and purchased before sept. 28, 2017, Bob's Bus Service can only claim depreciation at normal rates and is not eligible for BONUS DEPRECIATION.

2.

XYZ Inc. purchased a new airplane on July 20, 2017. Here it was assumed that the airplane was a brand new and not used by predecessor and so considered as a qualified asset. As the airplane was purchased before 28 September 2017, XYZ Inc cannot claim 100% of bonus depreciation under the amended rules. Thus XYZ Inc can claim a maximum depreciation at the rate of 50% i.e., 1,500,000 (3,000,000*50/100)