Ray closed his auto repair business last October. In January he joined RDX Repair Shop as a general partner. His only contribution to RDX is a pickup truck he used 100% for business. He purchased the truck new last March for $15,000 and elected not to expense any of the cost with section 179. He chose to depreciate the truck using the straight-line method with half-year convention and 5-year recovery period. As documented, he took $1,500 depreciation the first year (10% of the depreciable basis) and expected to take $3,000 (20%) depreciation for the second year. His adjusted basis in the truck when he joined RDX was $13,500, and its fair market value (FMV) was $14,000.

This is a two-part question. Question 1: What adjusted basis should RDX use for the pickup truck contributed by Ray?

Question 2: What amount of depreciation should RDX take this year on the pickup truck?

a) $14,000; $2,800 b) $14,000; $1,400 c) $13,500; $3,000 d) $13,500; $4,800