Question

Rank Opened a Machine Shop in 2022. He placed the following assets in service on June 2, 2022: milling machine, drill press, desk, file cabinet. The assets are all used 100% for business, and he will depreciate the assets using MACRS depreciation. Frank is not claiming the Section 179 deduction, the special depreciation allowance, or the de minimis election. Where on the Form 4562, Depreciation and Amortization, should the assets be reported?

a) Part I - Assets Placed in Service This Year
b) Part II - Special Depreciation Allowance and Other Depreciation (Do not include the section 179 expense deduction.)
c) Part III - MACRS Depreciation

Answer 1

Frank should report the business assets he placed in service on June 2, 2022, in Part III - MACRS Depreciation on Form 4562 as he is not claiming the Section 179 deduction, the special depreciation allowance, or the de minimis election.

Step-by-step explanation:

Frank, who opened a machine shop in 2022 and placed various business assets in service, should report these assets on Form 4562, Depreciation and Amortization under Part III - MACRS Depreciation. Since he is not claiming the Section 179 deduction, the special depreciation allowance, or the de minimis election, this is the appropriate section for assets being depreciated under MACRS without any additional first-year depreciation incentives. Frank should list the milling machine, drill press, desk, and file cabinet in Part III, as all these assets are being used for business purposes and eligible for MACRS depreciation beginning on their placed-in-service date.