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Use the following information to answer Questions 31–33: On September 2, 2018, a calendar-year company purchases...

Use the following information to answer Questions 31–33: On September 2, 2018, a calendar-year company purchases a used machine (5-year property) for $510,000. The company takes $500,000 of Sec. 179 but elects out of 100% bonus depreciation.

31. What is the maximum tax deduction for the machine in 2018?

a. $29,800

b. $83,400

c. $139,000

d. $141,000

32. What is the maximum tax deduction for the machine in 2019?

a. $17,600

b. $1,600

c. $3,200

d. $35,200

33. What is the maximum tax deduction for the machine in 2023 (Year 6)?

a. $0, because the machine has a 5-year recovery period

b. $576

c. $3,226

d. $6,451

34. On October 20 of the current year, a company with a December 31 year-end purchases a factory for $150,000, which includes $50,000 for the land. What is first-year depreciation for this asset under MACRS?

a. $535

b. $53,500

c. $111

d. $2,461

35. Which of the following is not subject to annual IRS depreciation limits?

a. An unmodified company van weighing 5,000 pounds

b. An unmodified company van weighing 7,500 pounds

c. A company car used by the company’s sales manager

d. A company car used by the company’s president

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Answer #1

34. Basis for depreciation =value of factory – value of land

                                               =$150000-$50000 = $100000

The depreciation rate would be 0.535% the factory is purchased in 10th month i.e. October.

Depreciation for first year

= basis for depreciation *depreciation rate

=100000*0.535% = 535$

Hence the option is`` a. $535’’

Depreciation % would be given in the MACRS table

35. As per IRS under sec 179 the vans and trucks weighing more than 6000 pounds to 14000 pounds are subject to annual depreciation limits. But any vehicle less than this limit are not subject to annual IRS depreciation limits.

So option (a) is correct

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