On December 1, 2014, Jim Miller placed in service office furniture (7-year life), which cost $28,000. Jim did not elect Section 179 expensing or bonus depreciation. The office furniture was the only asset purchased during the year. What amount can Jim claim as depreciation under MACRS for 2014?
A.
$1,000
B.
$2,000
C.
$4,000
D.
$7,000
First-year depreciation under MACRS is based on double declining balance. A 7-year life would yield depreciation of 2/7 the first year. Because the purchase was made in December, the mid-quarter convention is used and 1-1/2 months of depreciation is recorded. Depreciation is $1,000 ($28,000 × 2/7 × 1.5/12).
A taxpayer purchased and placed in service during the year a $761,000 piece of equipment. The equipment is 7-year property. The first-year depreciation for 7-year property is 14.29%. There is an allowable Section 179 limit in 2014 of $25,000. What amount is the maximum allowable depreciation without using bonus depreciation?
A.
$25,000
B.
$105,174
C.
$130,174
D.
$108,747
A taxpayer who elects to expense under Section 179 must reduce the depreciable basis of the Section 179 property by the amount of the Section 179 expense deduction. The maximum allowable depreciation is calculated as follows:
Basis of property $761,000
Less: Section 179 expense (25,000)
Adjusted basis $736,000
1st-year MACRS rate x 14.29%
1st-year depreciation $105,174
Section 179 expense 25,000
Maximum allowable depreciation $130,174
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Hi, could someone explain why in the first problem (ninja # 923) for first year depreciation for 7-yr. property they use DDB and for the second problem (#925) they use 1/7 even though they're both using MACRS?
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