Question

On January 2 of the current year for $300,000 Depreciator purchases new equipment for use in her business.  The purchase is made from an unrelated person.  The equipment has a 6-year class life and is 5-year property under § 168(c).  Depreciator plans to use the equipment for seven years, and expects it to have a salvage value of $30,000 at the end of that time.  Depreciator is a single, calendar year taxpayer, and she uses the equipment only in her business. In the following problems, compute the depreciation deductions with respect to the equipment in each year of its use and Depreciator’s adjusted basis for the property each year.

(C) Depreciator elects out of § 168K and does not elect § 179

Answer 1

Since the depreciator is not opting for either section 179 or 168 (k), it would be deprectiated over the life of 5 years (For claiming income tax benefit).

The per calendar year amount of depreciation will be ($300000-$30000)/5 years = $ 54000