On June 1,2013,Sandalwood Corporation purchases a passenger automobile for 100 percent use in its business.The automobile is in the 5 year cost recovery class and has a basis for depreciation of $30,000.Assuming that the corporation elects the accelerated method of cost recovery for the asset and does not elect to expense any of its cost or take bonus depreciation,what is the total tax depreciation deduction for the 2013 calendar tax year Year 1)?

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Quizplus · Accepted Answer

The automobile is in the 5-year MACRS property class, and using the half-year convention, the depreciation rate for the first year is 20%. Therefore, the depreciation deduction is 20% of $30,000, which equals $6,000. However, due to the luxury auto limits, the maximum depreciation deduction for a passenger automobile in 2013 is $3,160.

On June 1,2013,Sandalwood Corporation Purchases a Passenger Automobile for 100