Question

Kristine sold two assets on March 20th of the current year. The first was machinery with an original basis of $70,000, currently in the fourth year of depreciation, and depreciated under the half-year convention. The second was furniture with an original basis of $35,000, placed in service during the fourth quarter, currently in the third year of depreciation, and depreciated under the mid-quarter convention. What is Kristine's depreciation deduction for the current year if the depreciation recovery period is seven years? (Use MACRS Table 1 and Table 2 and Exhibit 10-6.) (Round final answer to the nearest whole number.)

Answer 1

Depreciation allowed on machinery =70000*12.49%*50% = $ 4,371.50

Note:

1. Depreciation rate for fourth year under half year convention is 12.49%

2. Only half of depreciation is allowed under half year convention in the year of disposal

Depreciation allowed for furniture = 35000*19.68%*1.5/12 = $ 861

Note:

1. Depreciation rate for third year under mid quarter convention is 19.68%

2. Asset is disposed during the 1st quarter

Total depreciation allowed for deduction in current year = $ 4,371.50 + $ 861 = $ 5,232.50