Omar acquires used 7-year personal property for $100,000 to use in his business in February 2010.Omar does not elect § 179 expensing,but does take the maximum regular cost recovery deduction.As a result,Omar will have a positive AMT adjustment in 2010 of what amount?
A)$0.
B)$3,580.
C)$10,710.
D)$14,290.
E)None of the above.

Question

Quizplus · Accepted Answer

The regular depreciation for the 7-year property is $100,000/7 = $14,285. However, the maximum regular cost recovery deduction for 2010 is limited to $11,160 ($3,160 plus 20% of remaining $50,000 basis after subtracting the salvage value of $20,000). 
The positive AMT adjustment is the difference between the regular depreciation and the AMT depreciation, which is calculated using the straight-line method and the ADS recovery period of 10 years for 7-year property. 
Therefore, the AMT depreciation for 2010 is $100,000/10 = $10,000, and the AMT adjustment is $14,285 - $10,000 = $4,285. However, the maximum AMT adjustment for 2010 is limited to $3,580 ($11,160 - $7,580, which is 70% of the regular depreciation), so the positive AMT adjustment is $3,580.

Omar Acquires Used 7-Year Personal Property for $100,000 to Use