Question

A taxpayer places a $50,000 5-year recovery period asset (not an auto) in service in 2022. This is the only asset placed in service in 2022. Assuming half-year convention and no immediate expensing, what is the adjusted basis of the assets after applying 2022 bonus depreciation?

a. $50,000
b. $10,000
c. $0
d. $25,000

Answer 1

After applying 100% bonus depreciation for the $50,000 5-year recovery period asset placed in service in 2022, the adjusted basis of the asset would be c. $0.

Step-by-step explanation:

The adjusted basis of an asset after applying bonus depreciation is calculated by subtracting the depreciation expense from the original cost of the asset. For 2022, businesses can take 100% bonus depreciation on qualifying assets. Since the asset in question is not an auto and assuming it qualifies for bonus depreciation, the taxpayer would be entitled to deduct the entire cost of the asset, $50,000, in the year it was placed in service, assuming no limits apply to their situation (for example, a limitation based on business income).

Therefore, after applying the 2022 bonus depreciation, the adjusted basis of the asset would be:

Original cost of the asset: $50,000
Minus bonus depreciation claimed: $50,000
Adjusted basis after bonus depreciation: $0

So the correct answer to the question is: c. $0