Potomac LLC purchased an automobile for $31,200 on August 5, 2020. What is Potomac's depreciation deduction for 2020? (Ignore any possible bonus depreciation.) (Use MACRS Table 1 and Exhibit 10-10.)
A) $10,100
B) $4,458
C) $6,240
D) $31,200
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

The automobile is a 5-year property, so it falls into the MACRS Table 1 category. Using Exhibit 10-10, we find that for property placed in service in August 2020, the applicable percentage is 33.33%. Thus, Potomac's depreciation deduction for 2020 is $31,200 x 33.33% = $10,400. However, since the automobile was placed in service on August 5, we only allow 5/12 of the full-year amount, which is $10,400 x 5/12 = $4,333.33. Rounding to the nearest dollar, we get $4,333, which is closest to choice C, $6,240. Therefore, the correct answer is C.

Potomac LLC Purchased an Automobile for $31,200 on August 5