Question

Assuming the taxpayer does NOT elect to use Section 179 or bonus depreciation, calculate the following:

1. The taxpayer purchases business computer equipment for $7,500 on March 12, 2020. How much is the tax depreciation expense on the computer for 2020?

2. The taxpayer acquires office furniture for $21,000 on June 25, 2020. How much is the tax depreciation expense on the office furniture for 2021?

Answer 1

Based on the information available in the question, we can answer as follows:-

Requirement 1:-

Per MACRS, Computers are depreciated over a period of 5 years.

Since the company has not placed more than 40% of assets during the last quarter of the year, we follow the Half Yearly Convention method to depreciate the assets during the year.

Depreciation for 2020 = $7,500 * 20% = $1,500

Depreciation for 2020 = $1,500

Requirement 2:-

Per MACRS, Office Furniture is to be depreciated over a period of 7 years.

Since the company has not placed more than 40% of assets during the last quarter of the year, we follow the Half Yearly Convention method to depreciate the assets during the year.

Depreciation for 2021(2nd year) = $21,000 * 24.49% = $5,143 (Rounded)

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