Problem 7-15 Modified Accelerated Cost Recovery System (MACRS), Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 7.4, 7.6, 7.7)
During 2015, Palo Fiero purchases the following property for use in his calendar year-end manufacturing business:
| Item | Date Acquired | Cost | | Manufacturing equipment | June 2 | $37,000 | | Office furniture | September 15 | 4,500 | | Office computer | November 18 | 3,800 | | Passenger automobile (used 90 percent for business) | May 31 | 37,500 | | Warehouse | April 23 | | | Building | | 170,000 | | Land | | 135,000 | |
Palo uses the accelerated depreciation method under MACRS, if available, and does not make the election to expense or take a bonus depreciation.
Use Form 4562 to report Palo's depreciation expense for 2015.
Enter all amounts as positive numbers. If required, round to the nearest dollar.
REQUIRED: FILL OUT FORM 4562
LINES THAT NEED TO BE FILLED IN ARE:
19b, 19c, 19i, 21, 22, and 26
Form 4562 Department of the Treasury Internal Revenue Service (99)
| | Depreciation and Amortization (Including Information on Listed Property) Attach to your tax return. Information about Form 4562 and its separate instructions is at www.irs.gov/form4562. | OMB No. 1545-0172 |
| 2015 Attachment Sequence No. 179 |
| Name(s) shown on return Palo Fiero | Business or activity to which this form relates Manufacturing | Identifying number |
| Part I | Election To Expense Certain Property Under Section 179 |
| | Note: If you have any listed property, complete Part V before you complete Part I. |
| 1 | Maximum amount (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1 | |
| 2 | Total cost of section 179 property placed in service (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 2 | |
| 3 | Threshold cost of section 179 property before reduction in limitation (see instructions) . . . . . . . . . . . . . . . . . . . . . | 3 | |
| 4 | Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -0- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 4 | |
| 5 | Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter -0-. If married filing separately, see instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 5 | |
| 6 | (a) Description of property | (b) Cost (business use only) | (c) Elected cost | | |
| | | | | | |
| | | | | | |
| 7 | Listed property. Enter the amount from line 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 7 | | | |
| 8 | Total elected cost of section 179 property. Add amounts in column (c), lines 6 and 7 . . . . . . . . . . . . . . . . . . . . . . . | 8 | |
| 9 | Tentative deduction. Enter the smaller of line 5 or line 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 9 | |
| 10 | Carryover of disallowed deduction from line 13 of your 2014 Form 4562 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 10 | |
| 11 | Business income limitation. Enter the smaller of business income (not less than zero) or line 5 (see instructions) | 11 | |
| 12 | Section 179 expense deduction. Add lines 9 and 10, but do not enter more than line 11 . . . . . . . . . . . . . . . . . . . . | 12 | |
| 13 | Carryover of disallowed deduction to 2016. Add lines 9 and 10, less line 12 . . . . . . . . . . . | | 13 | | |
| Note: | Do not use Part II or Part III below for listed property. Instead, use Part V. | |
| Part II | | Special Depreciation Allowance and Other Depreciation (Do not include listed property.) (See instructions.) |
| 14 | Special depreciation allowance for qualified property (other than listed property) placed in service during the tax year (see instructions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 14 | |
| 15 | Property subject to section 168(f)(1) election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 15 | |
| 16 | Other depreciation (including ACRS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 16 | |
| Part III | | MACRS Depreciation (Do not include listed property.) (See instructions.) |
| Section A |
| 17 | MACRS deductions for assets placed in service in tax years beginning before 2015 . . . . . . . . . . . . . . . . . . . . . . . . . | 17 | |
| 18 | If you are electing to group any assets placed in service during the tax year into one or more general asset accounts, check here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | |
| Section BAssets Placed in Service During 2015 Tax Year Using the General Depreciation System |
| (a) Classification of property | (b) Month and year placed in service | (c) Basis for depreciation (business/investment use onlysee instructions) | (d) Recovery period | (e) Convention | (f) Method | (g) Depreciation deduction |
| 19a | 3-year property | | | | | | |
| b | 5-year property | | | 5 yrs | MQ | 200 DB | |
| c | 7-year property | | | 7 yrs | HY | 200 DB | |
| d | 10-year property | | | | | | |
| e | 15-year property | | | | | | |
| f | 20-year property | | | | | | |
| g | 25-year property | | | 25 yrs. | | S/L | |
| h | Residential rental | | | 27.5 yrs. | MM | S/L | |
| | property | | | 27.5 yrs. | MM | S/L | |
| i | Nonresidential real | 04/23/15 | | 39 yrs. | MM | S/L | |
| | property | | | | MM | S/L | |
| Section CAssets Placed in Service During 2015 Tax Year Using the Alternative Depreciation System |
| 20a | Class life | | | | | S/L | |
| b | 12-year | | | 12 yrs. | | S/L | |
| c | 40-year | | | 40 yrs. | MM | S/L | |
| Part IV | Summary (See instructions.) |
| 21 | Listed property. Enter amount from line 28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 21 | |
| 22 | Total. Add amounts from line 12, lines 14 through 17, lines 19 and 20 in column (g), and line 21. Enter here and on the appropriate lines of your return. Partnerships and S corporationssee instructions . . . . . . . . . . . . . . . . . . . | 22 | |
| 23 | For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 23 | | |
| For Paperwork Reduction Act Notice, see separate instructions. | Cat. No. 12906N | Form 4562 (2015) |
| Part V | | Listed Property (Include automobiles, certain other vehicles, certain computers, and property |
| | | used for entertainment, recreation, or amusement.) |
| | | Note: For any vehicle for which you are using the standard mileage rate or deducting lease expense, complete only 24a, 24b, columns (a) through (c) of Section A, all of Section B, and Section C if applicable. |
| Section ADepreciation and Other Information (Caution: See the instructions for limits for passenger automobiles.) |
| 24a Do you have evidence to support the business/investment use claimed? Yes No | 24b If "Yes," is the evidence written? Yes No |
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | (i) |
| Type of property (list vehicles first) | Date placed in service | Business/ investment use percentage | Cost or other basis | Basis for depreciation (business/investment use only) | Recovery period | Method/ Convention | Depreciation deduction | Elected section 179 cost |
| 25 | Special depreciation allowance for qualified listed property placed in service during the tax year and used more than 50% in a qualified business use (see instructions) . . . . . . . . . . . | 25 | | |
| 26 | Property used more than 50% in a qualified business use: |
| | | % | | | | | | |
| Passenger automobile | 05/31/15 | % | | | | | | |
| | | % | | | | | | |
| 27 | Property used 50% or less in a qualified business use: |
| 28 | Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 . . . . . . . . . . . | 28 | | |
| 29 | Add amounts in column (i), line 26. Enter here and on line 7, page 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 29 | |
| Section BInformation on Use of Vehicles |
| Complete this section for vehicles used by a sole proprietor, partner, or other "more than 5% owner," or related person. If you provided vehicles to your employees, first answer the questions in Section C to see if you meet an exception to completing this section for those vehicles. |
| | | (a) | (b) | (c) | (d) | (e) | (f) |
| 30 | Total business/investment miles driven during the year (do not include commuting miles) . . | Vehicle 1 | Vehicle 2 | Vehicle 3 | Vehicle 4 | Vehicle 5 | Vehicle 6 |
| 31 | Total commuting miles driven during the year | | | | | | |
| 32 | Total other personal (noncommuting) miles driven . . . . . . . . . . . . . . | | | | | | |
| 33 | Total miles driven during the year. Add lines 30 through 32 . . . . . . | | | | | | |
| 34 | Was the vehicle available for personal use | Yes | No | Yes | No | Yes | No | Yes | No | Yes | No | Yes | No |
| | during off-duty hours? . . . . | | | | | | | | | | | | |
| 35 | Was the vehicle used primarily by a more than 5% owner or related person? . . . | | | | | | | | | | | | |
| 36 | Is another vehicle available for personal use? . | | | | | | | | | | | | |
| Section CQuestions for Employers Who Provide Vehicles for Use by Their Employees |
| Answer these questions to determine if you meet an exception to completing Section B for vehicles used by employees who are not more than 5% owners or related persons (see instructions). |
| 37 | Do you maintain a written policy statement that prohibits all personal use of vehicles, including commuting, by your employees? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | Yes | No |
| 38 | Do you maintain a written policy statement that prohibits personal use of vehicles, except commuting, by your employees? See the instructions for vehicles used by corporate officers, directors, or 1% or more owners . . . . . . . . . . | | |
| 39 | Do you treat all use of vehicles by employees as personal use? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | | |
| 40 | Do you provide more than five vehicles to your employees, obtain information from your employees about the use of the vehicles, and retain the information received? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | | |
| 41 | Do you meet the requirements concerning qualified automobile demonstration use? (See instructions.) . . . . . . . . . . . . | | |
| | Note: If your answer to 37, 38, 39, 40, or 41 is "Yes," do not complete Section B for the covered vehicles. | |
| | (a) | (b) | (c) | (d) | (e) | (f) |
| | Description of costs | Date amortization begins | Amortizable amount | Code section | Amortization period or percentage | Amortization for this year |
| 42 | Amortization of costs that begins during your 2015 tax year (see instructions): |
| | | | | | | |
| | | | | | | |
| 43 | Amortization of costs that began before your 2015 tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 43 | |
| 44 | Total. Add amounts in column (f). See the instructions for where to report . . . . . . . . . . . . . . . . . . . . . . . . . | 44 | |
| Form 4562 (2015) |
