Problem 12-26 MACRS depreciation categories (L012-4) Assume $78,000 is going to be invested in each of the following assets. Using Table 12-11 and Table 12-12. indicate the dollar amount of the first year's depreciation First Year's Depreciation a. Orice furniture b. Automobile c. Electric and gas utility property d. Sewage treatment plant Table 12-11 Categories for depreciation write-off Class 3-year MACRS All property with ADR midpoints of four years or less. Autos and light trucks are excluded from this category. 5-year MACRS Property with ADR midpoints of more than 4, but less than 10 years. Key assets in this category Include automobiles, light trucks, and techno- logical equipment such as computers and research-related properties. 7-year MACRS Property with ADR midpoints of 10 years or more, but less than 16 years. Most types of manufacturing equipment would fall into this category, as would office furniture and fixtures. 10-year MACRS Property with ADR midpoints of 16 years or more, but less than 20 years. Petroleum refining products, rallroad tank cars, and manufactured homes fall into this group. 15-year MACRS Property with ADR midpoints of 20 years or more, but less than 25 years. Land improvement pipeline distribution, telephone distribution, and sewage treatment plants all belong in this category. 20-year MACRS Property with ADR midpoints of 25 years or more (with the exception of real estate, which is treated separately). Key Investments in this cat- egory include electric and gas utility property and sewer pipes. 27.5-year Residential rental property if 80% or more of the gross rental income is MACRS from nontransient dwelling units (0.9., an apartment building); low- Income housing. 31.5-year Nonresidential real property that has no ADR class life or whose class MACRS life is 27.5 years or more. 39-year MACRS Nonresidential real property placed in service after May 12, 1993. Table 12-12 Depreciation percentages (expressed in decimals) Depreciation Year 3-Year MACRS 7-Year MACRS 10-Year MACRS 15-Year MACRS 20-Year MACRS 1 2 3 0.333 0.445 0.148 0.074 5-Year MACRS 0.200 0.320 0.192 0.115 0.115 0.058 4 0.143 0.245 0.175 0.125 0.089 0.089 0.089 0.045 5 0.100 0.180 0.144 0.115 0.092 0.074 0.066 0.066 0.065 0.065 0.033 7 8 0.050 0.095 0.086 0.077 0.069 0.062 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.059 0.030 10 ... 11 0.038 0.072 0.067 0.062 0.057 0.053 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.045 0.017 1.000 12 ... 13 14 15 16 17 18 19 20 21 1.000 1.000 1.000 1.000 1.000
