In June 2012,Chase purchases a new car for $37,000.He uses the car 75% for business purposes.What is Chase's maximum depreciation deduction for the car in 2012?
A)$ 5,550
B)$ 2,960
C)$ 4,200
D)$ 8,370
E)$11,160

Question

Quizplus · Accepted Answer

First, we need to determine the basis amount for the car which would be $37,000 (the purchase price).

Next, we need to determine the business use percentage which is 75%.

Using MACRS depreciation, the car would fall under the 5-year property class.

For 5-year property, the maximum depreciation deduction for the first year (in 2012) using the half-year convention is 20% of the basis amount.

So,

Depreciation deduction = 20% x $37,000 x 75% = $ 5,550

Therefore, the correct choice is D.

In June 2012,Chase Purchases a New Car for $37,000