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:

* I need help on all of the red underlined ones, thank you! *

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 Date Acquired Cost Manufacturing equipment (7 year) June 2 $50,000 Office furniture September 15 8,000 Office computer November 18 2,000 Passenger automobile (used 85 percent for business) Warehouse May 31 55,000 July 23 Building 170,000 Land 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 and Annual automobile depreciation limitations. OMB No. 1545-0172 Form 4562 2020 Department of the Treasury Internal Revenue Service (99) Depreciation and Amortization (Including Information on Listed Property) Attach to your tax return. Go to www.irs.gov/Form 4562 for instructions and the latest information. Attachment Sequence No. 179 Identifying number Name(s) shown on return Pepe Guardio Business or activity to which this form relates 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).. 1 1 2 2 Total cost of section 179 property placed in service (see instructions) Threshold cost of section 179 property before reduction in limitation (see instructions) 3 3 4 4 5 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter-O- 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 5 6 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 2019 Form 4562 10 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5. See instructions 11 12 12 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 Carryover of disallowed deduction to 2021. Add lines 9 and 10, less line 12.... 13 13 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 .... 14 15 15 Property subject to section 168(1)(1) election 16 Other depreciation (including ACRS) 16 Part III MACRS Depreciation (Don't include listed property. See instructions.) Section A 17 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 (a) Classification of Section B-Assets Placed in Service During 2020 Tax Year Using the General Depreciation System (d) (b) Month and year (c) Basis for depreciation (business/investment (e) (f) Recovery placed in service use only-see instructions) Convention Method period ( (g) Depreciation deduction property 19a 3-year property b 5-year property c 7-year property d 10-year property e 15-year property f 20-year property g 25-year property 25 yrs. S/L SL h Residential rental 27.5 yrs. MM S/L 27.5 yrs. MM S/L property i Nonresidential real 07/20 170,000 39 yrs. MM S/L property MM 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 30 yrs. MM S/L d 40-year 40 yrs. . MM S/L SL Part IV Summary (See instructions.) 21 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 (9), 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 .... 23 22 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, 24b, columns (a) through (c) of Section A, all of Section B, and Section C if applicable. 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 No (a) (b) (c) (d) (e) (1) (g) (h) (1) Basis for Business/ Elected depreciation Type of property (list vehicles investment Cost or Date placed in service (business/ Depreciation section Recovery period Method/ Convention first) use other basis deduction 179 investment percentage cost 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 25 26 Property used more than 50% in a qualified business use: % Passenger automobile 05/20 % 5 yrs. HY- 0 0 % 27 Property used 50% or less in a qualified business use: % S/L - % S/L- % S/L- 28 28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 29 Add amounts in column (i), line 26. Enter here and on line 7, page 1 .... Section B-Information on Use of Vehicles 29 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 Vehicle 1 Vehicle 2 Vehicle 3 Vehicle 4 Vehicle 5 Vehicle 6 (don't include commuting miles). 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 C-Questions for Employers Who Provide Vehicles for Use by Their Employees 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 Date Acquired Cost Manufacturing equipment (7 year) June 2 $50,000 Office furniture September 15 8,000 Office computer November 18 2,000 Passenger automobile (used 85 percent for business) Warehouse May 31 55,000 July 23 Building 170,000 Land 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 and Annual automobile depreciation limitations. OMB No. 1545-0172 Form 4562 2020 Department of the Treasury Internal Revenue Service (99) Depreciation and Amortization (Including Information on Listed Property) Attach to your tax return. Go to www.irs.gov/Form 4562 for instructions and the latest information. Attachment Sequence No. 179 Identifying number Name(s) shown on return Pepe Guardio Business or activity to which this form relates 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).. 1 1 2 2 Total cost of section 179 property placed in service (see instructions) Threshold cost of section 179 property before reduction in limitation (see instructions) 3 3 4 4 5 Reduction in limitation. Subtract line 3 from line 2. If zero or less, enter-O- 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 5 6 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 2019 Form 4562 10 11 Business income limitation. Enter the smaller of business income (not less than zero) or line 5. See instructions 11 12 12 Section 179 expense deduction. Add lines 9 and 10, but don't enter more than line 11 Carryover of disallowed deduction to 2021. Add lines 9 and 10, less line 12.... 13 13 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 .... 14 15 15 Property subject to section 168(1)(1) election 16 Other depreciation (including ACRS) 16 Part III MACRS Depreciation (Don't include listed property. See instructions.) Section A 17 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 (a) Classification of Section B-Assets Placed in Service During 2020 Tax Year Using the General Depreciation System (d) (b) Month and year (c) Basis for depreciation (business/investment (e) (f) Recovery placed in service use only-see instructions) Convention Method period ( (g) Depreciation deduction property 19a 3-year property b 5-year property c 7-year property d 10-year property e 15-year property f 20-year property g 25-year property 25 yrs. S/L SL h Residential rental 27.5 yrs. MM S/L 27.5 yrs. MM S/L property i Nonresidential real 07/20 170,000 39 yrs. MM S/L property MM 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 30 yrs. MM S/L d 40-year 40 yrs. . MM S/L SL Part IV Summary (See instructions.) 21 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 (9), 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 .... 23 22 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, 24b, columns (a) through (c) of Section A, all of Section B, and Section C if applicable. 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 No (a) (b) (c) (d) (e) (1) (g) (h) (1) Basis for Business/ Elected depreciation Type of property (list vehicles investment Cost or Date placed in service (business/ Depreciation section Recovery period Method/ Convention first) use other basis deduction 179 investment percentage cost 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 25 26 Property used more than 50% in a qualified business use: % Passenger automobile 05/20 % 5 yrs. HY- 0 0 % 27 Property used 50% or less in a qualified business use: % S/L - % S/L- % S/L- 28 28 Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 29 Add amounts in column (i), line 26. Enter here and on line 7, page 1 .... Section B-Information on Use of Vehicles 29 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 Vehicle 1 Vehicle 2 Vehicle 3 Vehicle 4 Vehicle 5 Vehicle 6 (don't include commuting miles). 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 C-Questions for Employers Who Provide Vehicles for Use by Their Employees