Problem 8-8 (Algorithmic) Modified Accelerated Cost Recovery System (MACRS), Election to Expense, Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.3, 8.4, 8.5) During 2020, William purchases the following capital assets for use in his catering business: $51.000 New passenger automobile (September 30) Baking equipment (June 30) 15,300 Assume that William decides to use the election to expense on the baking equipment (and has adequate taxable income to cover the deduction) but not on the automobile (which has a 5-year recovery period), and he also uses the MACRS accelerated method to calculate depreciation but elects out of bonus depreciation. Assume he has adequate taxable income. Click here to access the depreciation table and click here to access the annual automobile depreciation limitations. Calculate William's maximum depreciation deduction for 2020, assuming he uses the automobile 100 percent in his business. 29,240 x Feedback Check My Work Under Internal Revenue Code Section 179, taxpayers may elect to expense a limited amount of the acquisition cost of certain property. This cost would otherwise have to be deducted over a period of time using the regular cost recovery depreciation rules. The Section 179 deduction applies to both new and used property. To qualify for this limited expensing election, the property must be personal property placed in service during the year. Section 179 places three limitations on the expensing election: (1) a maximum on the annual amount expensed, (2) a phase-out of the annual amount limit, and (3) the taxable income limit. In addition to the limitations on the depreciation of passenger automobiles imposed by the listed property rules, the depreciation of passenger automobiles is subject to an additional limitation, commonly referred to as the luxury automobile limitation