Problem 8-12 Modified Accelerated Cost Recovery System (MACRS), Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.4, 8.5) During 2020, Pepe Guardio purchases the following property for use in his calendar year-end manufacturing business: Item Cost Manufacturing equipment (7 year) Office furniture Office computer Passenger automobile (used 85 percent for business) Date Acquired June 2 September 15 November 18 $50,000 8,000 2,000 55,000 May 31 July 23 Warehouse Building Land 170,000 135,000 Pepe uses the accelerated depreciation method under MACRS and takes bonus depreciation. Complete Form 4562, Depreciation and Amortization to determine the depreciation expense. If required, round your answers to the nearest dollar. If an amount is zero, enter "O". Enter amounts as positive numbers. Click here to access the depreciation tables and here to view Table 8.1: Recovery Periods for Assets Placed in Service After 1986 ar depreciation limitations. OMB No Form 4562 Department of the Depreciation and Amortization (Including Information on Listed Property) N OMB No. 1545-0172 Form 4562 Depreciation and Amortization Department of the (Including Information on Listed Property) 2020 Treasury Internal Attach to your tax return. Attachment Revenue Service (99) Go to www.irs.gov/Form4562 for instructions and the latest information. Sequence No. 179 Name(s) shown on return Business or activity to which this form relates Identifying number Pepe Guardio Manufacturing 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. Maximum amount (see instructions)... Total cost of section 179 property placed in service (see instructions).. Threshold cost of section 179 property before reduction in limitation (see instructions) Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -- Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter-O-. If married filing separately, see instructions (a) Description of property (b) Cost (business use only) (c) Elected cost 1 1 2 3 2. 3 4 5 4 5 6 7 8 8 9 Listed property. Enter the amount from line 29 7 Total elected cost of section 179 property. Add amounts in column (C), lines 6 and 7 Tentative deduction. Enter the smaller of line 5 or line 8. Carryover of disallowed deduction from line 13 of your 2019 Form 4562. Business income limitation. Enter the smaller of business income (not less than zero) or line 5. See instructions 10 a SE 11 12 12 13 14 15 16 17 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 13 Carryover of disallowed deduction to 2021. Add lines 9 and 10, less line 12 Note: Don't use Part II or Part III below for listed property. Instead, use Part v. Part II Special Depreciation Allowance and Other Depreciation (Don't 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 ...... 15 Property subject to section 168(f)(1) election. 16 Other depreciation (including ACRS). Part III MACRS Depreciation (Don't include listed property. See instructions.) Section A 17 MACRS deductions for assets placed in service in tax years beginning before 2020 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 B-Assets Placed in Service During 2020 Tax Year Using the General Depreciation System (a) Classification of (b) Month and year (c) Basis for depreciation (business/investment (e) (f) Recovery property placed in service use only-see instructions) Convention Method period 19a 3-year property b 5-year property c 7-year property d 10-year property e 15-year property (d) (9) Depreciation deduction n Residencial rental 27.5 yrs. MIMI SIL property 27.5 yrs. MM S/L i Nonresidential real 07/20 39 yrs. MM S/L MM 30 yrs. MM 40 yrs. MM property S/L Section C-Assets Placed in Service During 2020 Tax Year Using the Alternative Depreciation System 20a Class life S/L b 12-year 12 yrs. S/L c 30-year S/L d 40-year S/L Part IV Summary (See instructions.) 21 Listed property. Enter amount from line 28. 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 corporations-see instructions .... 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs .... For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 12906N 21 22 23 Form 4562 (2020) Form 4562 (2020) Page 2 Part V Listed Property (Include automobiles, certain other vehicles, certain aircraft, 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, 246, columns (a) No (a) (d) Section A-Depreciation 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 (b) (c) (e) (9) (h) (1) Basis for Business/ depreciation Elected Type of property (list vehicles Date placed in Recovery Cost or other investment use Method/ Depreciation (business/ section 179 first) service basis period Convention deduction percentage investment use only) 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 ... 26 Property used more than 50% in a qualified business use: cost 25 % Passenger automobile 05/20 % 5 yrs. HY % 27 Property used 50% or less in a qualified business use: % S/L- % S/L - 28 % S/L- 28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 29 Add amounts in column (1), line 26. Enter here and on line 7, page 1. 29 Section B-Information 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 Problem 8-12 Modified Accelerated Cost Recovery System (MACRS), Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.4, 8.5) During 2020, Pepe Guardio purchases the following property for use in his calendar year-end manufacturing business: Item Cost Manufacturing equipment (7 year) Office furniture Office computer Passenger automobile (used 85 percent for business) Date Acquired June 2 September 15 November 18 $50,000 8,000 2,000 55,000 May 31 July 23 Warehouse Building Land 170,000 135,000 Pepe uses the accelerated depreciation method under MACRS and takes bonus depreciation. Complete Form 4562, Depreciation and Amortization to determine the depreciation expense. If required, round your answers to the nearest dollar. If an amount is zero, enter "O". Enter amounts as positive numbers. Click here to access the depreciation tables and here to view Table 8.1: Recovery Periods for Assets Placed in Service After 1986 ar depreciation limitations. OMB No Form 4562 Department of the Depreciation and Amortization (Including Information on Listed Property) N OMB No. 1545-0172 Form 4562 Depreciation and Amortization Department of the (Including Information on Listed Property) 2020 Treasury Internal Attach to your tax return. Attachment Revenue Service (99) Go to www.irs.gov/Form4562 for instructions and the latest information. Sequence No. 179 Name(s) shown on return Business or activity to which this form relates Identifying number Pepe Guardio Manufacturing 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. Maximum amount (see instructions)... Total cost of section 179 property placed in service (see instructions).. Threshold cost of section 179 property before reduction in limitation (see instructions) Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter -- Dollar limitation for tax year. Subtract line 4 from line 1. If zero or less, enter-O-. If married filing separately, see instructions (a) Description of property (b) Cost (business use only) (c) Elected cost 1 1 2 3 2. 3 4 5 4 5 6 7 8 8 9 Listed property. Enter the amount from line 29 7 Total elected cost of section 179 property. Add amounts in column (C), lines 6 and 7 Tentative deduction. Enter the smaller of line 5 or line 8. Carryover of disallowed deduction from line 13 of your 2019 Form 4562. Business income limitation. Enter the smaller of business income (not less than zero) or line 5. See instructions 10 a SE 11 12 12 13 14 15 16 17 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 13 Carryover of disallowed deduction to 2021. Add lines 9 and 10, less line 12 Note: Don't use Part II or Part III below for listed property. Instead, use Part v. Part II Special Depreciation Allowance and Other Depreciation (Don't 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 ...... 15 Property subject to section 168(f)(1) election. 16 Other depreciation (including ACRS). Part III MACRS Depreciation (Don't include listed property. See instructions.) Section A 17 MACRS deductions for assets placed in service in tax years beginning before 2020 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 B-Assets Placed in Service During 2020 Tax Year Using the General Depreciation System (a) Classification of (b) Month and year (c) Basis for depreciation (business/investment (e) (f) Recovery property placed in service use only-see instructions) Convention Method period 19a 3-year property b 5-year property c 7-year property d 10-year property e 15-year property (d) (9) Depreciation deduction n Residencial rental 27.5 yrs. MIMI SIL property 27.5 yrs. MM S/L i Nonresidential real 07/20 39 yrs. MM S/L MM 30 yrs. MM 40 yrs. MM property S/L Section C-Assets Placed in Service During 2020 Tax Year Using the Alternative Depreciation System 20a Class life S/L b 12-year 12 yrs. S/L c 30-year S/L d 40-year S/L Part IV Summary (See instructions.) 21 Listed property. Enter amount from line 28. 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 corporations-see instructions .... 23 For assets shown above and placed in service during the current year, enter the portion of the basis attributable to section 263A costs .... For Paperwork Reduction Act Notice, see separate instructions. Cat. No. 12906N 21 22 23 Form 4562 (2020) Form 4562 (2020) Page 2 Part V Listed Property (Include automobiles, certain other vehicles, certain aircraft, 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, 246, columns (a) No (a) (d) Section A-Depreciation 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 (b) (c) (e) (9) (h) (1) Basis for Business/ depreciation Elected Type of property (list vehicles Date placed in Recovery Cost or other investment use Method/ Depreciation (business/ section 179 first) service basis period Convention deduction percentage investment use only) 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 ... 26 Property used more than 50% in a qualified business use: cost 25 % Passenger automobile 05/20 % 5 yrs. HY % 27 Property used 50% or less in a qualified business use: % S/L- % S/L - 28 % S/L- 28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 29 Add amounts in column (1), line 26. Enter here and on line 7, page 1. 29 Section B-Information 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