Problem 8-8 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 2018, William purchases the following capital assets for use in his catering business: New passenger automobile (September 30) Baking equipment (June 30) $51,500 6,500 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. Click here to access the depreciation table and click here to access the annual automobile depreciation limitations. Calculate William's maximum depreciation deduction for 2018, assuming he uses the automobile 100 percent in his business. TABLE 8.2 Recovery Year 20-Year (150% DB) 6.93 Accelerated Depreciation for Personal Property Assuming Half-Year Convention (For Property Placed in Service after December 31, 1986) 3-Year 5-Year 7-Year 10-Year 15-Year (200% DB) (200% DB) (200% DB) (200% DB) (150% DB) 33.33 20.00 14.29 10.00 5.00 44.45 32.00 24.49 18.00 9.50 14.81 * 19.20 17.49 14.40 8.55 7.41 11.52 * 12.49 11.52 7.70 11.52 8.93 * 9.22 5.76 8.92 7.37 6.23 8.93 6.55 * 5.90 * 4.46 6.55 5.90 6.56 5.91 6.55 5.90 3.28 5.91 5.90 5.91 5.90 3.750 7.219 6.677 6.177 5.713 5.285 4.888 4.522 4.462 * 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231 5.91 2.95 *Switch to straight-line depreciation. ANNUAL AUTOMOBILE DEPRECIATION LIMITATIONS-AUTOMOBILES ACQUIRED IN 2018 2018 Auto Depreciation Year 1 $18,000* Year 2 16,000 Year 3 9,600 Year 4 (and subsequent 5,760 years until fully depreciated) *Additional bonus depreciation of $8,000 is included in this amount