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Depreciation Calculations for Various Capital Purchases

Hazel purchased a new business asset (five-year property) on November 30, 2007, at a cost of $100,000. This was the only asset acquired by Hazel during 2007. On January 7, 2008, Hazel placed the asset in service. She did not elect to expense any of the asset cost under § 179, nor did she elect straight-line cost recovery. On October 25, 2009, Hazel sold the asset. Determine the cost recovery for 2009.
a. $9,600.
b. $16,000.
c. $26,000.
d. $38,000.
e. None of the above.

Bonnie purchased a new business asset (five-year property) on March 10, 2007, at a cost of $20,000. She also purchased a new business asset (seven-year property) on November 20, 2007, at a cost of $13,000. Bonnie did not elect to expense either of the assets under § 179, nor did she elect straight-line cost recovery. Determine the cost recovery deduction for 2007 for these assets.
a. $5,858.
b. $7,464.
c. $9,586.
d. $12,333.
e. None of the above.

On June 1, 2007, Sam purchased a truck for $50,000. The truck weighed less than 13,000 lbs and Sam used the truck in connection with his farming business. Sam does not elect to expense assets under § 179. Sam has, however, made an election to not have the uniform capitalization rules apply to the farming business.
Determine the cost recovery deduction for 2007.
a. $5,000.
b. $7,500.
c. $10,000.
d. $12,500.
e. None of the above.

Hans purchased a new passenger automobile on August 17, 2007, for $25,000. During the year the car was used 40% for business and 60% for personal use. Determine his cost recovery deduction for the car for 2007.
a. $500.
b. $1,000.
c. $1,224.
d. $1,500.
e. None of the above.

On May 2, 2007, Karen places in service a new sports utility vehicle that cost $70,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 40% for business and 60% for personal use. Determine the cost recovery deduction for 2007.
a. $1,224.
b. $2,800.
c. $7,000.
d. $10,003.
e. None of the above.

On July 10, 2007, Ariff places in service a new sports utility vehicle that cost $60,000 and weighed 6,300
pounds. The SUV is used 100% for business. Determine Ariff's maximum deduction for 2007, assuming
Ariff's § 179 business income is $110,000.
a. $7,660.
b. $26,400.
c. $35,500.
d. $40,400.
e. None of the above.

Bhaskar purchased a new factory building on September 2, 2006, for $4,000,000. He elected the alternative depreciation system (ADS). Determine the cost recovery deduction for 2008.
a. $30,000.
b. $36,000.
c. $44,000.
d. $100,000.
e. None of the above

Solution Preview

Percentages used will be found on the MACRS Cost recovery schedules published in professional resources.
One resource used is " Quickfinder" by Thomson Tax and a second resource is " Individual Income Taxes" by West Federal Taxation by Hoffman, Willis, and Smith , Thomson Southwestern Publishing copyrighted 2007

First question about Hazel
Purchase is in November and it is the only purchase so that brings in the thought of Mid-Quarter Depreciation Convenmtion instead of the Half-Year convention. However the asset was placed into service in January of the following year, so the depreciation starts then with the Half-Year convention. It is Five-Year property , no special rules so we get to assume one years worth of depreciation using Regular MACRS tables.
2008 Depreciation is calculated as follows: $100,000 * .20 = $20,000. Then the cost recovery ...

Solution Summary

This solution shows depreciation calculations for various items. Sources used include professional tax publications that are referenced.

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