Question

1) On March 5, 2015, Steven purchased a new Ford Focus for use of his job. The car cost $24,000 (including sales tax), with no trade-in involved. The car was driven 14,000 miles in 2015 and 18,000 in 2016 with usage as follows: 20% for his commute to the office and 80% for business trips. The mileage for 2016 was evenly distributed throughout the year. Steven deduts ACTUAL operating costs for his vehicle, using the 200% declining balance method with a half-year convention to compute MACRS depreciation. In addition, Steven did not claim any Section 179 expensing or additional first-year depreciation last year when he bought the car. Steven's expenses related to operating the Focus are as follows:

Gasoline: 2900
Oil change and lubrication : 150
Auto Insurance : 1800
Repairs: 400
Auto club dues: 160
License and registration: 120
Interest on car loan: 900

2) When the Marshalls purchased their home on February 2, 2015, they set aside 300 square feet (out of 2400 total square feet) of living space for Debra's office. (She is self employed). As of January 2016, the home had an adjusted basis of $240,000 for purposes of line 36 of Form 8829 (of which $40,000 is attributable to the land)-the fair market value is in excess of this amount. REleveant information concerning the residence for all of 2016 appears below:

Homeowners Insurance: 3200
Repairs and Maintenance: 1800
Utilities: 6200
Painting (office area only): 2500

The cost of Debra's office furniture and equipment were previously deducted under Section 179 in the years these assets were acquired. On June 29, 2016, she purchased a fireproof file cabinet for $800 to safeguard the blueprints of her structural desgins and construction plans. If possible, Debra prefers to avoid depreciating capital expenditures.

How would these two items be recorded on Form 4562?

Answer 1

1.

Car Cost	24000
Auto Insurance	1800
License and Registration	120
Int on car loan	900
Total	26820

Business Purposes = 21456 (26820*80%) Expenses for 2016 :- Gasoline 2900 Oil Change 150 Repairs 400 Auto Club dues 160 Total 3610
Business Purposes = 2888 (3610*80%) 2. Particulars Amount Business % Total Amount Insurance 3200 12.5% 400 Repairs and Maintenance 1800 12.5% 225 Utilities 6200 12.5% 775 Painting 2500 100.0% 2500 Total Business Expenditure 3900 The Fire Proof of 800 can be added to cost of the asset and can claim depreciation accordingly which is relating to the business of 12.5% (300/2400 sq.ft)