In 2016, a taxpayer purchases a new automobile (5 year recovery) for $56,000 for 100% use in her business. What is the total cost recovery assuming that the taxpayer does or does not elect bonus depreciation on the auto (half-year convention but no immediate expensing)?

Question

​In 2016, a taxpayer purchases a new automobile (5 year recovery) for $56,000 for 100% use in her business. What is the total cost recovery assuming that the taxpayer does or does not elect bonus depreciation on the auto (half-year convention but no immediate expensing)?

Quizplus · Accepted Answer

Without bonus depreciation, the cost recovery will be based on the MACRS depreciation table for a 5-year property using the half-year convention, which gives a recovery of $3,160. 
With bonus depreciation, the taxpayer can immediately expense 50% of the cost of the vehicle ($28,000), then use the MACRS depreciation table for the remaining 50% ($28,000) of the cost, resulting in a total cost recovery of $11,160. Therefore, the best choice is option C.

​In 2016, a Taxpayer Purchases a New Automobile (5 Year

In 2016, a Taxpayer Purchases a New Automobile (5 Year