Focus: whether to make a straight election rather than claim 100% Bonus on a new addition

Facts: Kelly White is a single taxpayer. She owns an S Corporation that generates taxable income of $636, 150. This is reported on line 1 of the Sch K of the 1120S. She takes all of the income as her distributable share. The S Corporation does not pay her salary. Nor does she claim itemized deductions. In 2021 her business makes a significant asset acquisition that has cost basis of $500,000. The asset has a 5-year life for tax purposes.

Question: Kellys CPA would like to evaluate whether a straight-line election is preferable versus the 100% Bonus. Kelly needs to model out tax depreciation for years 1 through 6 with years 1 and 6 applying the mid-year convention. a. How much depreciation does Kelly claim in years 1 and 6? b. How much depreciation does Kelly claim in years 2,3,4, and 5? c. How much tax does Kelly pay in each of the 6 years and what is the total tax?

Notes: 1. use 2021 rates and standard deduction for all years. 2. ignore any Self-employment taxes and the high wage surtax.