During 2018, 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 2018 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

For the alternative minimum tax (AMT) purposes, the 7-year MACRS property is depreciated under the 150% declining balance method, switching to straight-line when advantageous. The first-year depreciation rate for 7-year property under this method is 14.29%, so the depreciation deduction is $40,000 * 14.29% = $5,716, rounded to the nearest dollar is $5,714.

During 2018, Williams Company Purchases and Places in Service Office