Modified Accelerated Cost Recovery System (MACRS), Election to Expense (Section 179) (LO 8.2, 8.3)

Mike purchases a new heavy-duty truck (5-year class recovery property) for his delivery service on March 30, 2021. No other assets were purchased during the year. The truck is not considered a passenger automobile for purposes of the listed property and luxury automobile limitations. The truck has a depreciable basis of $50,000 and an estimated useful life of 5 years. Assume half-year convention for tax.

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a. Calculate the amount of depreciation for 2021 using financial accounting straight-line depreciation (not the straight-line MACRS election) over the truck's estimated useful life.

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b. Calculate the amount of depreciation for 2021 using the straight-line depreciation election, using MACRS tables over the minimum number of years with no bonus depreciation or election to expense.

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c. Calculate the amount of depreciation for 2021, including bonus depreciation but no election to expense, that Mike could deduct using the MACRS tables.

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d. Assume no income limit on the expense election. Calculate the amount of depreciation for 2021 including the election to expense but no bonus depreciation that Mike could deduct.

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