Question

On January 31, 2020, you “placed in service” a new piece of equipment in your Schedule...

On January 31, 2020, you “placed in service” a new piece of equipment in your Schedule C widget-making business – namely, a brand new widget-making machine. It is the only depreciable asset you will place in service during all of 2020.

You paid exactly $1,000,000 for the machine. You do not want “expensing” or “bonus” depreciation or any other fancy cost recovery, just regular MACRS.

State exactly how much your 2020 MACRS deduction will be with respect to your new machine, and explain why that is the correct dollar amount.

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Answer-

In the given question it is assumed that it's an eligible property as per the requirement of the IRS and he is the only person entitled to take full deduction.

Under MACRS (Modified Accelerated cost recovery system), Cost of the asset can be recovered via annual deduction in a straight line introduced by the IRS by the method of . Under which useful life of Equipment is considered as 5 years.

Annual Depreciation= Cost/ Useful life

=$1,000,000/5

=$200,000

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