Beth's business purchased only one asset during the current year (a full 12-month tax year). On December 1 Beth placed in service machinery (seven-year property)with a basis of $75,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation). (Use MACRS Table 2.)(Round final answer to the nearest whole number.)
A)$2,678
B)$3,750
C)$10,717
D)$15,000
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

Under MACRS for seven-year property, the half-year convention applies, and the depreciation rate for the first year is 14.29%. However, since the asset was placed in service in December, the mid-quarter convention applies, and the rate for the fourth quarter is 3.57%. Therefore, the maximum depreciation expense is $75,000 * 3.57% = $2,678.

Beth's Business Purchased Only One Asset During the Current Year