Beth's business purchased only one asset during the current year (a full 12-month tax year). Beth placed in service machinery (7-year property) on December 1 with a basis of $50,000. Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation):
A) $1,785
B) $2,500
C) $7,145
D)$10,000
E)None of these

Question

Quizplus · Accepted Answer

The maximum depreciation expense is calculated using the MACRS half-year convention for 7-year property. For the first year, the depreciation rate is 14.29% for the full year, but since the asset was placed in service in December, only half of this rate applies, resulting in a depreciation expense of $1,785 (50,000 * 14.29% * 0.5).

Beth's Business Purchased Only One Asset During the Current Year