Problem 8-12 Modified Accelerated Cost Recovery System (MACRS), Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.4, 8.5)

During 2021, Pepe Guardio purchases the following property for use in his calendar year-end manufacturing business:

Item	Date Acquired	Cost
Manufacturing equipment (7 year)	June 2	$50,000
Office furniture	September 15	8,000
Office computer	November 18	2,000
Passenger automobile (used 85 percent for business)	May 31	55,000
Warehouse	July 23
Building		170,000
Land		135,000

Pepe uses the accelerated depreciation method under MACRS and takes bonus depreciation.

Complete Form 4562, Depreciation and Amortization to determine the depreciation expense.

Form 4562 (2021)

Page 2

Part V		Listed Property (Include automobiles, certain other vehicles, certain aircraft, and property used for entertainment,
		recreation, or amusement.)
		Note: For any vehicle for which you are using the standard mileage rate or deducting lease expense, complete only 24a, 24b, columns (a) through (c) of Section A, all of Section B, and Section C if applicable.
Section ADepreciation and Other Information (Caution: See the instructions for limits for passenger automobiles.)

24a Do you have evidence to support the business/investment use claimed? Yes No

24b If "Yes," is the evidence written? Yes No

(a)		(b)	(c)	(d)	(e)	(f)	(g)		(h)		(i)
Type of property (list vehicles first)		Date placed in service	Business/ investment use percentage	Cost or other basis	Basis for depreciation (business/ investment use only)	Recovery period	Method/ Convention		Depreciation deduction		Elected section 179 cost
25	Special depreciation allowance for qualified listed property placed in service during the tax year and used more than 50% in a qualified business use. See instructions . . . . . . . . . . .							25	I can't figure this out.
26	Property used more than 50% in a qualified business use:
			%
Passenger automobileOffice computerOffice furniturePassenger automobile		05/21	85%	55,000	I can't figure out this if not 46,750 what is it?	5 yrs.	HY		I can't figure this out if not 85% of 18200		0
			%
27	Property used 50% or less in a qualified business use:
		%					S/L -
		%					S/L -
		%					S/L -
28	Add amounts in column (h), lines 25 through 27. Enter here and on line 21, page 1 . . . .							28	fill in the blank
29	Add amounts in column (i), line 26. Enter here and on line 7, page 1 . . . . . . . . . . . . . . . . . . . . . . . . .									29

(26) I know without bonus depreciation limit it is 10,200 x 85% But with Bonus depreciation limit I am not figuring out the answer. I assumed (18,200 x 85%) Why is it not 55,000 x 85% Basis.

(24a) I thought it was $200,000. How is the answer figured for this depreciation deduction of 50%.