Omar acquires used 7-year personal property for $100,000 to use in his business in February 2016.Omar does not elect § 179 expensing,but he does take the maximum regular cost recovery deduction.He elects not to take additional first-year depreciation.As a result,Omar incurs a positive AMT adjustment in 2016 of what amount?
A)$0
B)$3,580
C)$10,710
D)$14,290
E)None of the above

Question

Quizplus · Accepted Answer

The regular cost recovery deduction for 7-year property is 14.29% in 2016. Therefore, Omar's regular depreciation deduction is $14,290 ($100,000 * 14.29%). However, for AMT purpose, the depreciation deduction is calculated using the straight-line method for the Alternative Depreciation System (ADS) recovery period, which is 10 years for 7-year property. The ADS depreciation deduction for Omar is $10,710 ($100,000 * 10.71%). Therefore, his positive AMT adjustment is the difference between the regular and ADS deductions, which is $3,580 ($14,290 - $10,710).

Omar Acquires Used 7-Year Personal Property for $100,000 to Use