On June 1, 2019, 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 $60,000. 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 2019 calendar tax year (Year 1)?

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For the 2019 calendar tax year, under the Modified Accelerated Cost Recovery System (MACRS), a passenger automobile placed in service in the year 2019 and used 100% for business would be subject to the luxury auto limits. The first-year depreciation limit for automobiles (not claiming bonus depreciation) is $10,100. This limit applies even though the automobile is in the 5-year property class and the taxpayer is using the accelerated method of depreciation.

On June 1, 2019, Sandalwood Corporation Purchases a Passenger Automobile