Question

Sairra, LLC purchased only one asset during the current year. Sairra placed in service furniture (7-year property) on April 16 with a basis of $25,000. Calculate the maximum depreciation expense for the current year, rounding to a whole number (ignoring §179 and bonus depreciation):

A. $1,786
B. $3,573
C. $4,463
D. $5,000
E. None of these

Answer 1

The maximum depreciation expense for the current year is $3,573.

Step-by-step explanation:

The maximum depreciation expense for the current year can be calculated using the Modified Accelerated Cost Recovery System (MACRS). The furniture is considered 7-year property, so it falls under the MACRS recovery period of 7 years. The MACRS system allows for a depreciation deduction of 14.29% for the furniture in the first year.

Therefore, the maximum depreciation expense for the current year would be 14.29% of the basis of $25,000, which is $3,572.50. When rounded to a whole number, the correct answer is B. $3,573.