Beth's business purchased only one asset during the current year (a full 12-month tax year).Beth placed in service machinery (7-year property)on December 1 with a basis of $50,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 2 in the text)
A) $1,785.
B) $2,500.
C) $7,145.
D) $10,000.
E) None of the choices are correct.

Question

Beth's business purchased only one asset during the current year (a full 12-month tax year).Beth placed in service machinery (7-year property)on December 1 with a basis of $50,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 2 in the text)
A) $1,785.
B) $2,500.
C) $7,145.
D) $10,000.
E) None of the choices are correct.

Quizplus · Accepted Answer

Since the machinery was placed in service in December, the mid-quarter convention applies. For 7-year property, the first-year depreciation rate under the mid-quarter convention is 3.57%. Therefore, the maximum depreciation expense is $50,000 x 3.57% = $1,785.

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