Question

In 2019, Muhammad purchased a new computer for $16,000. The computer is used 100% for business. Muhammad did not make a $179 election with respect to the computer. He does not claim any available additional first-year depreciation.
Required:
1. If Muhammad uses the MACRS statutory percentage method, determine his cost recovery deduction for 2019 for computing taxable income and for computing his alternative minimum tax.

Answer 1

Answer: His cost deduction would be $3,200

Explanation:

Without the mid-quarter convention Muhammad’s 2019 MACRS deduction would be $3,200 ($16,000 x .20). The mid-quarter convention slows down the taxpayers available cost recovery deduction.