Problem 9-23 (LO. 2)

On July 1, 2016, Rex purchases a new automobile for $40,000. He uses the car 80% for business and drives the car as follows: 8,000 miles in 2016, 19,000 miles in 2017, 20,000 miles in 2018, and 15,000 miles in 2019.

Determine Rex's basis in the business portion of the auto as of January 1, 2020, under the following assumptions:

If required, round answers to the nearest dollar.

a. Rex uses the automatic mileage method.

Compute his basis adjustments for depreciation for each year. Click here to access the basis adjustment table.

2016: $

2017: $

2018: $

2019: $

Rex's adjusted basis in the auto on January 1, 2020, is $.

b. Rex uses the actual cost method. [Assume that no 179 expensing is claimed and that 200% declining-balance cost recovery with the half-year convention is used. The recovery limitation for an auto placed in service in 2016 is as follows: $3,160 (first year), $5,100 (second year), $3,050 (third year), and $1,875 (fourth year).]

Compute his depreciation deductions for year. Click here to access the depreciation table.

2016: $

2017: $

2018: $

2019: $

Rex's adjusted basis in the auto on January 1, 2020, is $.

Year 2020 2019 2018 2017 2016 Rate per Mile 27 cents 26 cents 25 cents 25 cents 24 cents Exhibit 8.3 MACRS Accelerated Depreciation for Personal Property Assuming Half-Year Convention (Percentage Rates) For Property Placed in Service after December 31, 1986 Recovery 3-Year 5-Year 7-Year 10-Year 15-Year 20-Year Year (200% DB) (200% DB) (200% DB) (200% DB) (150% DB) (150% DB) 33.33 20.00 14.29 10.00 5.00 3.750 2 44.45 32.00 24.49 18.00 9.50 7.219 3 14.81" 19.20 17.49 14.40 8.55 6.677 4 7.41 11.52" 12.49 11.52 7.70 6.177 5 11.52 8.93 9.22 6.93 5.713 6 5.76 8.92 7.37 6.23 5.285 7 8.93 6.55" 5.90 4.888 8 4.46 6.55 5.90 4.522 6.56 5.91 4.462" 10 6.55 5.90 4.461 11 3.28 5.91 4.462 12 5.90 4.461 13 5.91 4.462 14 5.90 4.461 15 5.91 4.462 16 2.95 4.461 17 4.462 18 4.461 19 4.462 20 4.461 21 2.231 9