Serena owns a van that she paid $22,000 for in 2010 and used exclusively for personal purposes until May 9,2015,when she began using the van in her plumbing business.On May 9,2015,a comparable van was selling for $13,000.Serena sells the van on October 28,2017.Assuming that the van is 5-year MACRS property,it is not listed property,and that Serena did not make the Section 179 election to expense on the van,what is her allowable depreciation deduction in 2017?
A)$749
B)$1,248
C)$1,267
D)$2,112
E)$2,496

Question

Quizplus · Accepted Answer

The van is a 5-year MACRS property, and Serena began using it for business in 2015. By 2017, it is in its third year of depreciation. The MACRS depreciation rate for the third year is 19.20%. The basis for depreciation is the fair market value when it was converted to business use, which is $13,000. Therefore, the depreciation deduction is $13,000 * 19.20% = $2,496. However, since the van was sold on October 28, 2017, the mid-quarter convention applies, and the deduction is prorated for 3/4 of the year, resulting in $2,496 * 3/4 = $1,248.

Serena Owns a Van That She Paid $22,000 for in 2010