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Chad, a sole proprietor of a private boat charter business, purchased and placed into service ten boats for $260,000 each on May 1, Year 1. These were the only assets Chad placed into service in Year 1. Assume the boats have a 10 year MACRS recovery period. What is the maximum amount, if any, that Chad can deduct in Year 1 if he does not elect out of bonus depreciation

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jepessoa

Answer:

The maximum amount that Chad can depreciate in yer 1 if he decides not to elect bonus depreciation is $26,000

Explanation:

MACRS 10 year depreciation rate of recovery half year convention:

Year                Depreciation %      Purchase cost        Depreciation

1                           10%                          $260,000            $26,000

2                          18%                          $260,000             $46,800

3                          14.40%                     $260,000             $37,440

4                          11.52%                      $260,000             $29,952

5                          9.22%                      $260,000             $23,972

6                          7.37%                       $260,000              $19,162

7                          6.55%                      $260,000              $17,030

8                          6.55%                      $260,000             $17,030

9                          6.56%                      $260,000             $17,056

10                         6.55%                      $260,000             $17,030

11                          3.28%                      $260,000              $8,528

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