Chapter 10 Depreciation: The Mid-year Convention

Han owns a landscaping business in Denver Colorado. In 2019, Han purchases two new dump trucks for his business. The trucks cost $125,000 each. He places the blue dump truck into service on June 1, 2019. He placed the red dump truck into service on October 9, 2019. Han would like to limit any 179 deductions for the year to a single amount of $50,000 in total. He would like to allocate ALL of his elected 179 deduction completely to the red truck. The trucks are the only assets Han placed in service during the year. In addition, Han has active income in the amount of $1,000,000. What are the tax consequences for Han?

1) The trucks are tangible property and are considered _____________ property (select real property or personal property.

2) Han's initial basis in the blue truck is _______________.Han's initial basis in the red truck is _______________.Han's depreciable basis for the blue truck is________________. His depreciable basis for the red truck is _____________________. In addition, ______% of the property was placed into service during the last quarter of the year; therefore, Han will use the mid-_________________ convention.

3) Han's depreciation deduction for the blue truck in 2019 is _________________.Han's depreciation deduction for the red truck in 2019 is _________________. His total cost recovery in 2019 is _______________(all depreciation + 179 Deduction).

4) His adjusted basis for the blue truck is _______________ at the end of the year. His adjusted basis for the red truck is _______________ at the end of the year.

Chapter 10 Depreciation: The Mid-quarter Convention

Han owns a landscaping business in Denver Colorado. In 2019, Han purchases two new dump trucks for his business. The trucks cost $125,000 each. He places the blue dump truck into service on June 1, 2019. He placed the red dump truck into service on October 8, 2019. Han would like to limit any code section 179 deductions for the year to a single amount of $50,000 in total. He would like to split his elected code section 179 deduction evenly between the two trucks. The trucks are the only assets Han placed in service during the year. In addition, Han has active income in the amount of $1,000,000. What are the tax consequences for Han?

1) The trucks are tangible property and are considered _____________ property (select real property or personal property.

2) Han's initial basis in the blue truck is _______________.Han's initial basis in the red truck is _______________.Han's depreciable basis for the blue truck is________________. His depreciable basis for the red truck is _____________________. In addition, ______% of the property was placed into service during the last quarter of the year; therefore, Han will use the mid-_________________ convention.

3) Han's depreciation deduction for the blue truck in 2019 is _________________.Han's depreciation deduction for the red truck in 2019 is _________________. His total cost recovery in 2019 is _______________(all depreciation + 179 Deduction).

4) His adjusted basis for the blue truck is _______________ at the end of the year. His adjusted basis for the red truck is _______________ at the end of the year.

5) Han may be able to use his code section 179 deduction to avoid the mid-quarter convention and increase his depreciation deduction by: