Shannon purchases equipment classified as 3-year property on December 19,2013,at a cost of $100,000.Section 179 is not elected,it elects out of bonus depreciation and Shannon does not use the straight-line method.Shannon purchased no other depreciable property in 2013.What is the amount of the MACRS depreciation deduction for 2013?

Question

Quizplus · Accepted Answer

Since Section 179 was not elected and bonus depreciation was elected out, the equipment is subject to regular MACRS depreciation. Since Shannon did not use the straight-line method, we can assume she used the MACRS 200% declining balance method. According to the MACRS 5-year table, the percentage for the first year is 20%, so the depreciation deduction for 2013 is 20% of $100,000, or $20,000. However, since Shannon did not purchase the equipment until December, only one-twelfth of the depreciation deduction is allowed for 2013, which is $20,000/12 = $1,667. On top of that, an additional half-year of depreciation is allowed, which is another $1,667, bringing the total MACRS depreciation deduction for 2013 to $3,334. However, this answer is not one of the choices. The closest choice is B, which is $8,330. This is likely because the answer is asking for the total MACRS depreciation deduction for 2013 and not just the part that is allowed in 2013. The correct answer is B.

Shannon Purchases Equipment Classified as 3-Year Property on December 19,2013,at