On June, 20, 2018, Simon Corporation (a calendar-year corporation) purchased and placed in service a new automobile costing $68,000. This vehicle is used 100% for business. Simon makes whatever elections are necessary to maximum its overall depreciation deduction for the year of acquisition. What is Simon Corporation's maximum cost recovery deduction for the automobile for 2020?
A) $0
B) $5,760
C) $9,600
D) $15,000

Question

Quizplus · Accepted Answer

The automobile has a depreciable basis of $68,000. Assuming Simon Corporation elected to use bonus depreciation, it can deduct 100% of the cost in the year of acquisition. The remaining basis ($0) is depreciated over 5 years under the MACRS system. In 2020, the car would be in its third year of depreciation, and Simon would be able to deduct 30% of the remaining basis, which is $22,800 ($68,000 x 20% x 30%). Therefore, Simon Corporation's maximum cost recovery deduction for the automobile for 2020 is $9,600 ($22,800 x 40%).

On June, 20, 2018, Simon Corporation (A Calendar-Year Corporation) Purchased