Billie Bob purchased a used camera (five-year property)for use in his sole proprietorship in the prior year. The basis of the camera was $2,400. Billie Bob used the camera in his business 60 percent of the time during the first year. During the second year, Billie Bob used the camera 40 percent for business use. Calculate Billie Bob's depreciation deduction during the second year, assuming the sole proprietorship had a loss during the year. (Billie Bob did not place the asset in service in the last quarter.)(Use MACRS Table 1.)
A)$0
B)$48
C)$192
D)$336
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

Since the camera is a five-year property, the applicable MACRS percentage is 20% for year 1 and year 2, according to MACRS Table 1.

First Year: 
Depreciation = Basis x MACRS percentage x Business use percentage 
Depreciation = $2,400 x 20% x 60% = $288

Second Year: 
Depreciation = Basis x MACRS percentage x Business use percentage 
Depreciation = $2,400 x 20% x 40% = $192

However, since the sole proprietorship had a loss during the second year, the maximum allowable depreciation deduction would be the amount that would reduce the loss to zero.

Assuming the loss for the second year is $192 or greater, then the depreciation deduction for the second year would be $192. 
Therefore, the correct answer is B) $48.

Billie Bob Purchased a Used Camera (Five-Year Property)for Use in His