2009 depreciation computations asset cost class life

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2009 Depreciation Computations Asset Cost Class Life Depr Pctg 2009 Depr 1. Business equipment $85,500 7 yr. 14 2 / 7 % $12,214 2. Car 14,000 5 yr. 20% 2,800 * 3. Of fi ce furniture 18,050 7 yr. 14 2 / 7 % 2,579 4. Of fi ce building 185,000 39 yr. SL 4,546 ** Total allowable depreciation deduction—2009 $22,139 * First year depreciation limitation of $2,960 exceeds actual depreciation and therefore is not applicable. ** The building was purchased in January. Under the half-month convention, only one-half month’s depreciation is allowed for this month. Thus, total 2009 depreciation expense is based on 11½ months. 2010 Depreciation Computations Asset Cost Class Life 2009 Depr Remaining Basis Depr Pctg 2010 Depr 1. Business equipment $85,500 7 yr. $12,214 $73,286 2 / 7 ths $20,939 2. Car 14,000 5 yr. 2,800 11,200 40% 4,480 * 3. Of fi ce furniture 18,050 7 yr. 2,579 15,471 2 / 7 ths 4,420 4. Of fi ce building 185,000 39 yr. 4,546 N/A SL 4,744 ** Total allowable depreciation deduction—2010 $34,583 * Second year depreciation limitation on passenger autos is $4,800 and does not apply in this case (because it exceeds actual depreciation calculation). Code Sec. 280F(a)(1)(A). ** $185,000 ÷ 39 yrs = $4,744. Alternative Straight-Line Depreciation Assuming the company claims bonus depreciation and depreciates the remaining basis of each property using 38. the alternative straight-line method, 2009 and 2010 depreciation deductions would be computed as follows:
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98 CCH Federal Taxation—Comprehensive Topics Chapter 6 © 2009 CCH. All Rights Reserved. 2009 Depreciation Computations Asset Cost Class Life Depr Pctg 2009 Depr 1. Business equipment $85,500 7 yr. 7 1 / 7 % $6,107 2. Car 14,000 5 yr. 10% 1,400 3. Of fi ce furniture 18,050 7 yr. 7 1 / 7 % 1,289 4. Of fi ce building 185,000 39 yr. SL 4,546 Total allowable depreciation deduction—2009 $13,342 2010 Depreciation Computations Asset Cost Class Life 2009 Depr Remaining Basis Depr Pctg 2010 Depr 1. Business equipment $85,500 7 yr. $6,107 $79,393 1 / 7 th $11,342 2. Car 14,000 5 yr. 1,400 12,600 1 / 5 th 2,520 3. Of fi ce furniture 18,050 7 yr. 1,289 16,761 1 / 7 th 2,394 4. Of fi ce building 185,000 39 yr. 4,546 N/A SL 4,744 Total allowable depreciation deduction—2010 $21,000 MACRS Depreciation When using MACRS depreciation, a half-year depreciation deduction is allowed in the year of disposal except 39. for real property. MACRS depreciation on real property in the year of disposal is based on months the property is in service with a partial month counting as one-half month. Based on this information, a $2,240 depreciation deduction is allowed on the car in 2010, the year the asset was sold. The 2010 depreciation deduction on the building, sold in June 2010, amounts to $2,174, based on the following formula: Basis/SL Rate × Months Held = Depreciation on Building $185,000/39 years × 5.5/12 = $2,174 Depreciation on car—$14,000 $2,800 (2009 depreciation) = $11,200 × 40% × 1/2 = $2,240. Midquarter Convention Asset 40. 2009 Depreciation Computations Asset Cost Class Life Depr Pctg 2009 Depr 1. Business equipment $85,500 7 yr. 3.57% * $3,052 2. Car 14,000 5 yr. 25% ** 2,960 3. Of fi ce furniture 18,050 7 yr. 10.71% *** 1,933
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99 Instructor’s Manual © 2009 CCH. All Rights Reserved. Chapter 6 * Regular MACRS depreciation expense = ($85,500 × 2 / 7 ths) × 1 / 8 th = $3,054. The company must use the mid- quarter convention. This equipment was purchased in the 4th quarter, so only 1 / 8 th year of depreciation can be deducted.
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