Aaron purchases a taxicab (5-year MACRS property) for $20,000 on December 3, 2018. This is the only business asset Aaron acquires in 2018. He does not desire to use the Section 179 election and elects not to take bonus depreciation. What is the maximum amount of depreciation that he can deduct in 2018?
A)$1,000
B)$3,000
C)$4,000
D)$10,500
E)$14,000

Question

Quizplus · Accepted Answer

Since Aaron did not elect to use Section 179 or bonus depreciation, the maximum amount of depreciation he can deduct in 2018 is based on the 5-year MACRS schedule using the half-year convention. Therefore, the depreciation for 2018 would be calculated as follows: 
Cost of taxicab = $20,000 
MACRS percentage for 5-year property in year 1 = 20% 
Depreciation for 2018 = $20,000 x 20% x 1/2 year = $1,000

Aaron Purchases a Taxicab (5-Year MACRS Property) for $20,000 on December