Arlington LLC purchased an automobile for $55,000 on July 5, 2020. What is Arlington's depreciation deduction for 2020 if its business-use percentage is 75 percent? (Ignore any possible bonus depreciation.)(Use Exhibit 10-10.)

Question

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First, we need to determine the automobile's depreciable basis, which is $55,000. Next, we need to calculate the depreciation deduction using the MACRS depreciation table for 5-year property (since automobiles are classified as 5-year property). According to Exhibit 10-10, the applicable percentage for year 1 is 22%.

$55,000 (depreciable basis) x 22% (applicable percentage) = $12,100

However, since the business-use percentage is only 75%, we need to multiply the above result by 75% to get the correct depreciation deduction:

$12,100 x 75% = $9,075

Therefore, the depreciation deduction for 2020 is $7,575.

Arlington LLC Purchased an Automobile for $55,000 on July 5