Karen is an employee of KF Corporation (a calendar-year taxpayer). In February 2004, KF purchased a $40,000 car for Karen’s use. During 2004, 2005, 2006, and 2007, 60 percent of Karen’s mileage on the car was business related and 40 percent was for her personal driving. Her personal use was properly treated as taxable fringe benefit income.

a. Compute KF Corporation’s depreciation deductions for 2004, 2005, 2006, and 2007 if 50 percent bonus depreciation was claimed.

b. How would your answer change if Karen had used the car for only 45 percent business use and 55 percent personal use?

AppendixLO1