Delta Freight Company purchases 10 delivery vans on April 4,2013,at a total cost of $366,000.Delta uses the regular MACRS system on all of its delivery vans (the delivery vans are 5-year MACRS property and are not limited by listed property rules).Delta's annual income is $100,000 before the depreciation deduction,and they elect out of bonus depreciation.What is Delta's maximum cost recovery deduction on the vans in 2013?

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Quizplus · Accepted Answer

Since Delta elected out of bonus depreciation, the maximum cost recovery deduction for the first year is calculated by using the regular MACRS system with half-year convention. The 5-year MACRS property has a depreciation rate of 20% in the first year. Therefore, the total maximum cost recovery deduction for the 10 delivery vans for the first year is $366,000 x 20% = $73,200. However, since Delta's annual income before the depreciation deduction is only $100,000, their maximum deductible amount is limited to $100,000. Therefore, the answer is $100,000.

Delta Freight Company Purchases 10 Delivery Vans on April 4,2013,at