Question

An asset is placed in service on May 15, 2017 and has a depreciable basis of $40,000. The asset is in the 7-year recovery class and the half-year convention applies. What is the maximum depreciation deduction that may be claimed for 2017, excluding the election to expense and bonus depreciation?

Answer 1

Answer: The maximum depreciation deduction that can be claimed is $5,716.

We can interpret the last line of the question as" What is maximum possible depreciation deduction provided the to expense and bonus depreciation is not claimed?

Given this, it means that the asset can be depreciated at the rate given in the MARCS depreciation schedule as per the half year convention. Since the asset falls in the seven year recovery class, the depreciation rate from the 7 year MARCS table is 14.29%.

Hence the depreciation is
`40000 *0.1429 = 5716`.