Chapter 17.II, Problem 1RE

Ink Masters Printing purchased a new printing press for $660,000 on February 9.2010. The press is used for business 90% of the time. As the accountant for the company, you elected to lake a $100,000 Section 179 deduction. The press also qualified for a special depreciation allowance. (Sec Table 17-4.)

a. What was the basis for depreciation of the printing press?

Business-use basis = $660.000\times .9=\$594,000$

Tentative basis = 594.000 - 100,000 = $494.000

The asset qualifies for a 50% special depreciation allowance (Table 17-4).

Basis for depreciation = 494.000 (100% -50%) = $247,000

b. What was the amount of the third year's depreciation using MACRS?

Printing presses are in the 7-year property class (Table 17-1).

Third-year depreciation = 17.49% (Table 17-2)

$247,000\times 1749=\$43,200.30$