Heather purchased furniture and fixtures (7-year property)for her retail shop for $50,000.What is the AMT depreciation adjustment required in 2017 if the property was purchased in May 2017,assuming no bonus depreciation was taken?

Question

Quizplus · Accepted Answer

Since the property was purchased in May 2017, it is put in service in the middle of the year and the half-year convention applies for AMT purposes. Assuming a 7-year MACRS recovery period, the straight-line AMT depreciation rate is 4.29% (100%/7 years/2). Therefore, the AMT depreciation adjustment for 2017 is $50,000 x 4.29% = $2,145. However, the adjustment is reduced by the regular tax depreciation adjustment for the year, which is $50,000 x 14.29% (the mid-year MACRS rate for 7-year property) = $7,145. Thus, the AMT depreciation adjustment required in 2017 is $2,145 - $7,145 = -$5,000. Since AMT depreciation cannot be less than zero, the answer is B) $1,790, which is the amount that can be carried forward to future years.

Heather Purchased Furniture and Fixtures (7-Year Property)for Her Retail Shop