What amount can Melanie claim this year for her office in the home deduction under the Regular Method?
Problem 9-33 (LO. 5)
Melanie is employed full-time as an accountant for a national hardware chain. She recently started a private consulting practice, which provides tax advice and financial planning to the general public. For this purpose, she maintains an office in her home. Expenses relating to her home for 2020 are as follows:
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Melanie's residence cost $350,000 (excluding land) and has living space of 2,000 square feet, of which 20% (400 square feet) is devoted to business. The office was placed in service in February 2019, and under the Regular Method, Melanie had an unused office in the home deduction of $800 for 2019. Assume there is sufficient net income from her consulting practice.
8-7cCost Recovery Tables
| Summary of Tables | |
|---|---|
| Exhibit 8.3 |
Regular MACRS table for personalty.
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| Exhibit 8.4 |
Regular MACRS table for personalty.
|
| Exhibit 8.5 |
MACRS optional straight-line table for personalty.
|
| Exhibit 8.6 |
Alternative minimum tax declining-balance table for personalty.
|
| Exhibit 8.7 |
Alternative depreciation system straight-line table for personalty.
|
| Exhibit 8.8 |
Regular MACRS straight-line table for realty.
|
| Exhibit 8.9 |
Alternative depreciation system straight-line table for realty.
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*Switchover to straight-line depreciation.
MACRS Accelerated Depreciation for Personal Property Assuming Mid-Quarter Convention (Percentage Rates)
| For Property Placed in Service after December 31, 1986 (Partial Table) | ||||
|---|---|---|---|---|
| 3-Year | ||||
| Recovery Year | First Quarter | Second Quarter | Third Quarter | Fourth Quarter |
| 1 | 58.33 | 41.67 | 25.00 | 8.33 |
| 2 | 27.78 | 38.89 | 50.00 | 61.11 |
| 5-Year | ||||
| Recovery Year | First Quarter | Second Quarter | Third Quarter | Fourth Quarter |
| 1 | 35.00 | 25.00 | 15.00 | 5.00 |
| 2 | 26.00 | 30.00 | 34.00 | 38.00 |
| 7-Year | ||||
| Recovery Year | First Quarter | Second Quarter | Third Quarter | Fourth Quarter |
| 1 | 25.00 | 17.85 | 10.71 | 3.57 |
| 2 | 21.43 | 23.47 | 25.51 | 27.55 |
MACRS Straight-Line Depreciation for Personal Property Assuming Half-Year Convention
| For Property Placed in Service after December 31, 1986 | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Other Recovery Years | Last Recovery Year | |||||||||
| MACRS Class | % First Recovery Year | Years | % | Year | % | |||||
| 3-year | 16.67 | 2–3 | 33.33 | 4 | 16.67 | |||||
| 5-year | 10.00 | 2–5 | 20.00 | 6 | 10.00 | |||||
| 7-year | 7.14 | 2–7 | 14.29 | 8 | 7.14 | |||||
| 10-year | 5.00 | 2–10 | 10.00 | 11 | 5.00 | |||||
| 15-year | 3.33 | 2–15 | 6.67 | 16 | 3.33 | |||||
| 20-year | 2.50 | 2–20 | 5.00 | 21 | 2.50 |
Note: The last two rows of this table are used for qualified improvement property (15-year normal MACRS; 20-year ADS).
* The figures in this table are taken from the official table that appears in Rev.Proc. 87–57, 1987–2 C.B. 687. Because of its length, the complete table is not presented.
**Switchover to straight-line depreciation.
ADS Straight-Line for Personal Property Assuming Half-Year Convention (Percentage Rates)
| For Property Placed in Service after December 31, 1986 (Partial Table) | ||||
|---|---|---|---|---|
| Recovery Year | 5-Year Class | 10-Year Class | 12-Year Class | |
| 1 | 10.00 | 5.00 | 4.17 | |
| 2 | 20.00 | 10.00 | 8.33 | |
| 3 | 20.00 | 10.00 | 8.33 | |
| 4 | 20.00 | 10.00 | 8.33 | |
| 5 | 20.00 | 10.00 | 8.33 | |
| 6 | 10.00 | 10.00 | 8.33 | |
| 7 | 10.00 | 8.34 | ||
| 8 | 10.00 | 8.33 | ||
| 9 | 10.00 | 8.34 | ||
| 10 | 10.00 | 8.33 | ||
| 11 | 5.00 | 8.34 | ||
| 12 | 8.33 | |||
| 13 | 4.17 |
*The official tables contain a separate row for each year. For ease of presentation, certain years are grouped in these tables. In some instances, this will produce a difference of .001 for the last digit when compared with the official tables.
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