Question

Scott Tire Co. began operations January 1, 2012. Keith, the sole proprietor, purchased a building, land, and one piece of machinery in the first year of operations. In the current year, Keith purchased two additional pieces of equipment, and a tow-truck. Keith wants to maximize his depreciation deduction this year.

Use the following information to complete a Depreciation Worksheet and then prepare a Form 4562 for the current year for Scott Tire Co. (EIN# 25-6183786) which is owned by Keith. Be sure and read the additional information below.

Asset Date Acquired MACRS Life Purchase Price

Machine A 1/15/2012 5 years $30,000

Non-residential Building 1/31/2013 39 years $205,000

Land 2/15/2012 $55,000

Equipment A 06/1/2016 7 years $35,000

Equipment B 11/1/2017 5 years $25,000

Tow Truck A 12/1/2017 5 years $22,000

Scott Tire Co.’s Net Profit on Schedule C (before any depreciation) is $55,000.

ADDITIONAL INFORMATION

1. All the properties were used 100% of the time in the business.

2. ASSUME that NO BONUS or ADDITIONAL depreciation is taken other than Section 179 depreciation. Assume also that NO SPECIAL ELECTIONS were made regarding real property.

3. The ENDING amount is the beginning balance in the accumulated depreciation plus the current year plus any Sec. 179 amount for the current year. The beginning balance for all the assets will not be zero because they were not all purchased during the current year. For assets purchased in a previous year, you will need to calculate the beginning balance.

4. Most of the numbers that appear on the Form 4562 will come directly from the Depreciation Worksheet. The amount of MACRS deductions for assets placed in service before the CY

Answer 1

Asset	Date Acquired	MACRS Life	Purchase price	Year of charge	Basis	MACRS %	Depreciation
Machine A	15-Jan-2014	5 years	$30,000	3rd year	First quarter	15.600%	$4,680.000
Non-Residential Building	31-Jan-2014	39 years	$205,000	3rd year	Yearly	2.564%	$5,256.20
Land	15-Feb-2014		$55,000
Equipment A	1-Jun-2016	7 years	$35,000	1st year	Second quarter	17.850%	$6,247.50
Equipment B	1-Nov-2016	5 years	$25,000	1st year	Fourth quarter	5.000%	$1,250.00
Tow Truck A	1-Dec-2016	5 years	$22,000	1st year	Fourth quarter	5.000%	$1,100.00
Total							$18,533.700