Bonnie Jo purchased a used camera (five-year property) for use in her sole proprietorship. The basis of the camera was $2,600. Bonnie Jo used the camera in her business 60 percent of the time and used it for personal purposes the rest of the time during the first year. Calculate Bonnie Jo's depreciation deduction during the first year, assuming the sole proprietorship had a loss during the year. (Bonnie did not place the property in service in the last quarter.) (Use MACRS Table 1.)
A) $260
B) $312
C) $520
D) $2,600
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

Since Bonnie Jo used the camera for both business and personal purposes, she must use the percentage of business use to calculate her depreciation deduction. In this case, she used the camera for business purposes 60% of the time, so her depreciation deduction would be:

$2,600 (basis) x 60% (business use) x 20% (MACRS first year rate) = $312

Even though the sole proprietorship had a loss during the year, Bonnie Jo can still deduct the depreciation expense on her tax return.

Bonnie Jo Purchased a Used Camera (Five-Year Property) for Use