Final answer:
To calculate the depreciation deduction on the auto, we need to determine the depreciable basis of the car and the applicable depreciation method. Using the half-year convention and bonus depreciation, the depreciation deduction would be a. $15,360.
Step-by-step explanation:
To calculate the depreciation deduction on the auto, we need to determine the depreciable basis of the car and the applicable depreciation method. The depreciable basis is the cost of the auto minus the salvage value. In this case, the cost of the auto is $56,000 and since it is a new auto, we can assume the salvage value is negligible.
The applicable depreciation method is the Modified Accelerated Cost Recovery System (MACRS) with a half-year convention and bonus depreciation. MACRS assigns different recovery periods to different types of property, and for autos used more than 50 percent for business, the recovery period is 5 years.
Using the half-year convention, we assume the auto is placed in service in the middle of the year, so we multiply the depreciable basis by the depreciation rate for the first year, which is 20 percent. Finally, we apply bonus depreciation, which is an additional 100 percent deduction for the first year.
Using these calculations, the depreciation deduction on the auto would be $15,360 (56,000 * 0.20 * 0.80), so the correct answer is a. $15,360.