Eric is a self-employed consultant.In May of the current year,Eric acquired a computer system (5-year property)for $6,000 and used the computer 80% for business and 20% for personal purposes.Eric does not take any Sec.179 deduction.The maximum depreciation deduction for is
A)$600.
B)$800.
C)$960.
D)$1,200.

Question

Quizplus · Accepted Answer

Since the computer is 5-year property and Eric did not take any Sec. 179 deduction, the computer will be depreciated under MACRS (Modified Accelerated Cost Recovery System). The MACRS depreciation for 5-year property with the half-year convention and 80% business use is calculated as follows:

Year 1: (6,000 x 0.20) x 20% = $240  
Year 2: (6,000 - 240) x 0.32 x 20% = $307.20  
Year 3: (6,000 - 240 - 307.20) x 0.192 x 20% = $184.32  
Year 4: (6,000 - 240 - 307.20 - 184.32) x 0.1152 x 20% = $110.59  
Year 5: (6,000 - 240 - 307.20 - 184.32 - 110.59) x 0.1152 x 20% = $77.41

The maximum depreciation deduction for the current year would be the Year 1 depreciation, which is $240. Therefore, the best choice is C) $960.

Eric Is a Self-Employed Consultant