Daniel purchases 5-year class listed property on March 2, 2018, for $30,000. It is used 75% for business, and the remainder for personal use. Daniel wishes to maximize his 2018 depreciation deduction. What is Daniel 's 2018 depreciation deduction?
A)$2,250
B)$2,700
C)$3,375
D)$4,500
E)$6,000

Question

Quizplus · Accepted Answer

To calculate the depreciation deduction for a 5-year class listed property, we use the Modified Accelerated Cost Recovery System (MACRS) depreciation method. According to MACRS, the property is depreciated over a period of 5 years using the double-declining balance method, which means the depreciation percentage is 40% (200% / 5 years) for the first year.

Since Daniel uses the property 75% for business, he can deduct 75% of the depreciation cost as a business expense. So the calculation for the depreciation deduction is as follows:
Depreciation deduction = Cost of the property x Depreciation percentage x % of business use
Depreciation deduction = $30,000 x 40% x 75% = $4,500

Therefore, Daniel's 2018 depreciation deduction is $4,500. Option D is the correct answer.

Daniel Purchases 5-Year Class Listed Property on March 2, 2018