Final answer:
The maximum depreciation expense for Tasha LLC for the 7-year property under the mid-quarter convention cannot be accurately calculated without the specific mid-quarter percentages. The provided options do not match the understood method of calculating mid-quarter convention depreciation. Therefore, option E. None of these is the most fitting from the provided choices.
Step-by-step explanation:
To calculate the maximum depreciation expense for Tasha LLC, which disposed of 7-year property under the mid-quarter convention in the fourth year of ownership, we need to determine the depreciation for both the full fourth year and the partial year due to disposal. The mid-quarter convention deems the property to have been placed in service or disposed of at the midpoint of the quarter of the tax year in which the property is placed in service or disposed of. Since the furniture was disposed of in December, it fell within the fourth quarter.
The MACRS (Modified Accelerated Cost Recovery System) 7-year table for the fourth year of a 7-year property is 12.49% depreciation fraction when using the half-year convention. However, because the mid-quarter convention applies, we would adjust this rate proportionally based on the quarter in which the item was placed in service or disposed of.
In general, the depreciation rate in the fourth year under the mid-quarter convention would be roughly one quarter of the fourth full year's rate, as the convention treats assets as being acquired and disposed in the middle of the quarter. Then, we multiply the applicable rate by the basis of the property to calculate the depreciation expense.
Since the exact mid-quarter percentage rates are not given, we cannot perform an exact calculation here. Nonetheless, based on the percentages provided, we can attempt to approximate the calculation. For the fourth year, the depreciation rate is 12.49%, but due to the disposal, less than the full year's depreciation may be claimed. It's typically about one quarter of the 12.49% rate for a disposal in the fourth quarter, which would be approximately 3.12%. Applying this rate to the $20,000 basis we get: $20,000 x 3.12% = $624 for the partial year.
Therefore, without exact mid-quarter percentages, the provided options do not reflect the correct depreciation expense using the standard 7-year tables and the mid-quarter convention for the fact pattern provided. The closest estimate would be $624, so, E. None of these is the most fitting option from the given choices.