Question

The United Express Company begins business in August 2020 by purchasing the assets listed in the table below.

Refer to the MACRS Depreciation Tables to answer the following question.

Note: Round your intermediate computations to the nearest dollar.

Asset		Cost
Trucks		$588,000
Tractor units		55,000
Office equipment		506,000

If United Express elects not to claim bonus depreciation, the maximum MACRS depreciation on the assets (including a possible Section 179 election) for 2020 would be $

Answer 1

To claim the maximum MACRS depreciation(without bonus depreciation):

▪elect to expense the maximum allowed under Section 179

elect to expense the asset with the longest useful life

[Office equip]Office Equipment (Class 00.11: 7-year life):

Sec. 179 Election to expense = $506,000
Remaining election available = $1,040,000 - $506,000 = $534,000

Trucks (Class 00.241: 5-year life):

Sec. 179 Election to expense(after Office Equip) = $534,000
Depreciable basis = $588,000 - $534,000 = $54,000
Table A10-2 First-year depreciation = $54,000 * 20% = $10,800

Cost-recovery on trucks = $534,000 + $10,800 = $544,800

Tractor Units (Class 00.26: 3-year life):Depreciable basis = $55,000
Table A10-2 First-year depreciation = 33.33% * $55,000 = $18,333

Cost-recovery on tractor units = $18,333

Total 2020 depreciation = $18,333 + $544,800 + $506,000 = $1,069,133