David acquired an automobile for $30,000 for use in his unincorporated business at the beginning of 2018 and used the standard mileage rate method in 2018. He plans to switch to the actual expense method for 2019. The automobile was used 25,000 miles in 2018. What is the amount of the adjusted basis of the automobile for purposes of computing depreciation in 2019?
A) $20,000
B) $16,625
C) $30,000
D) $23,750

Question

Quizplus · Accepted Answer

The adjusted basis is calculated by reducing the original cost by the depreciation allowed or allowable. Using the standard mileage rate in 2018, David would have deducted $0.545 per mile for 25,000 miles, totaling $13,625. Therefore, the adjusted basis is $30,000 - $13,625 = $16,375. However, since the question asks for the basis for depreciation in 2019, the correct choice reflects the remaining basis after accounting for the mileage deduction, which is $23,750.

David Acquired an Automobile for $30,000 for Use in His