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On July 1, 2013, Rex purchases a new automobile for $50,500. He uses the car 80% for business and drives the car as follows:
On July 1, 2013, Rex purchases a new automobile for $50,500. He uses the car 80% for business and drives the car as follows: 9,500 miles in 2013, 23,750 miles in 2014, 26,600 miles in 2015, and 19,000 miles in 2016. Determine Rex's basis in the business portion of the auto as of January 1, 2017, under the following assumptions:
If required, round answers to the nearest dollar.
a. Rex uses the automatic mileage method.
Compute his basis adjustments for depreciation for each year.
2013: $
2014: $
2015: $
2016: $
Rex's adjusted basis in the auto on January 1, 2017, is $.
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A taxpayer has two choices in determining automobile expenses: the automatic mileage method and the actual cost method. A basis adjustment is required if the taxpayer changes from the automatic mileage method to the actual operating cost method.
b. Rex uses the actual cost method. [Assume that no § 179 expensing is claimed and that 200% declining-balance cost recovery with the half-year convention is used. The recovery limitation for an auto placed in service in 2013 is as follows: $3,160 (first year), $5,100 (second year), $3,050 (third year), and $1,875 (fourth year).]
Compute his depreciation deductions for year.
2014: $
2015: $
2016: $
Rex's adjusted basis in the auto on January 1, 2017, is $.
