During 2013,Williams Company purchases and places in service office equipment with a cost of $40,000.The equipment is 7-year MACRS property.What is its 2013 depreciation deduction for purposes of the alternative minimum tax?
A)$ 2,000
B)$ 2,857
C)$ 3,000
D)$ 4,000
E)$ 5,714

Question

Quizplus · Accepted Answer

The MACRS depreciation for 7-year property in the first year is 14.29% (double declining balance method). Therefore, the depreciation deduction for AMT purposes in 2013 is $40,000 x 14.29% = $5,714. However, the amount of the deduction is limited to the excess of the AMT depreciation over the regular tax depreciation, which is $5,714 - ($40,000 x 10.71%) = $2,857. Thus, the correct answer is B.

During 2013,Williams Company Purchases and Places in Service Office Equipment