Question
Way Corporation disposed of the following tangible personal property assets in the current year. Date Date Original Asset Acquired Sold Convention Basis Furniture (7-year) 5/12/2014
Way Corporation disposed of the following tangible personal property assets in the current year.
Date | Date | Original | ||||
Asset | Acquired | Sold | Convention | Basis | ||
Furniture (7-year) | 5/12/2014 | 7/15/2018 | HY | $ | 102,500 | |
Machinery (7-year) | 3/23/2015 | 3/15/2018 | MQ | 119,500 | ||
Delivery truck* (5-year) | 9/17/2016 | 3/13/2018 | HY | 58,000 | ||
Machinery (7-year) | 10/11/2017 | 8/11/2018 | MQ | 319,400 | ||
Computer (5-year) | 10/11/2018 | 12/15/2018 | HY | 118,000 | ||
|
*Used 100 percent for business.
Assume that the delivery truck is not a luxury auto. Calculate Way Corporations 2018 depreciation deduction (ignore 179 expense and bonus depreciation for this problem). (Use MACRS Table 1, Table 2, and Exhibit 10-6.) (Round your intermediate dollar calculations and final answer to the nearest whole dollar amount.)
Table 1 MACRS Half-Year Convention
Depreciation Rate for Recovery Period | ||||||
---|---|---|---|---|---|---|
3-Year | 5-Year | 7-Year | 10-Year | 15-Year | 20-Year | |
Year 1 | 33.33% | 20.00% | 14.29% | 10.00% | 5.00% | 3.750% |
Year 2 | 44.45 | 32.00 | 24.49 | 18.00 | 9.50 | 7.219 |
Year 3 | 14.81 | 19.20 | 17.49 | 14.40 | 8.55 | 6.677 |
Year 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.70 | 6.177 |
Year 5 | 11.52 | 8.93 | 9.22 | 6.93 | 5.713 | |
Year 6 | 5.76 | 8.92 | 7.37 | 6.23 | 5.285 | |
Year 7 | 8.93 | 6.55 | 5.90 | 4.888 | ||
Year 8 | 4.46 | 6.55 | 5.90 | 4.522 | ||
Year 9 | 6.56 | 5.91 | 4.462 | |||
Year 10 | 6.55 | 5.90 | 4.461 | |||
Year 11 | 3.28 | 5.91 | 4.462 | |||
Year 12 | 5.90 | 4.461 | ||||
Year 13 | 5.91 | 4.462 | ||||
Year 14 | 5.90 | 4.461 | ||||
Year 15 | 5.91 | 4.462 | ||||
Year 16 | 2.95 | 4.461 | ||||
Year 17 | 4.462 | |||||
Year 18 | 4.461 | |||||
Year 19 | 4.462 | |||||
Year 20 | 4.461 | |||||
Year 21 | 2.231 |
TABLE 2a MACRS Mid-Quarter Convention: For property placed in service during the first quarter
Depreciation Rate for Recovery Period | ||
---|---|---|
5-Year | 7-Year | |
Year 1 | 35.00% | 25.00% |
Year 2 | 26.00 | 21.43 |
Year 3 | 15.60 | 15.31 |
Year 4 | 11.01 | 10.93 |
Year 5 | 11.01 | 8.75 |
Year 6 | 1.38 | 8.74 |
Year 7 | 8.75 | |
Year 8 | 1.09 |
TABLE 2b MACRS Mid-Quarter Convention: For property placed in service during the second quarter
Depreciation Rate for Recovery Period | ||
---|---|---|
5-Year | 7-Year | |
Year 1 | 25.00% | 17.85% |
Year 2 | 30.00 | 23.47 |
Year 3 | 18.00 | 16.76 |
Year 4 | 11.37 | 11.97 |
Year 5 | 11.37 | 8.87 |
Year 6 | 4.26 | 8.87 |
Year 7 | 8.87 | |
Year 8 | 3.34 |
TABLE 2c MACRS Mid-Quarter Convention: For property placed in service during the third quarter
Depreciation Rate for Recovery Period | ||
---|---|---|
5-Year | 7-Year | |
Year 1 | 15.00% | 10.71% |
Year 2 | 34.00 | 25.51 |
Year 3 | 20.40 | 18.22 |
Year 4 | 12.24 | 13.02 |
Year 5 | 11.30 | 9.30 |
Year 6 | 7.06 | 8.85 |
Year 7 | 8.86 | |
Year 8 | 5.53 |
TABLE 2d MACRS-Mid Quarter Convention: For property placed in service during the fourth quarter
Depreciation Rate for Recovery Period | ||
---|---|---|
5-Year | 7-Year | |
Year 1 | 5.00% | 3.57% |
Year 2 | 38.00 | 27.55 |
Year 3 | 22.80 | 19.68 |
Year 4 | 13.68 | 14.06 |
Year 5 | 10.94 | 10.04 |
Year 6 | 9.58 | 8.73 |
Year 7 | 8.73 | |
Year 8 | 7.64 |
EXHIBIT 10-6 Mid-Quarter Convention Percentage of Full Years Depreciation in Year of Disposition
Quarter of Disposition | Percentage | Calculation* |
---|---|---|
1st | 12.5% | 1.5/12 |
2nd | 37.5 | 4.5/12 |
3rd | 62.5 | 7.5/12 |
4th | 87.5 | 10.5/12 |
* The calculation is the number of months the taxpayer held or is deemed to have held the asset in the year of disposition divided by 12 months in the year.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started