Your company purchased office furniture (asset class 00.11) for $100,000 and placed it in service on August 13, 2013. The cost basis for the furniture is $100,000, and it will be depreciated with the GDS using half-year convention. The expected salvage (market) value of the furniture is $5,000 in

Question

Your company purchased office furniture (asset class 00.11) for $100,000 and placed it in service on August 13, 2013. The cost basis for the furniture is $100,000, and it will be depreciated with the GDS using half-year convention. The expected salvage (market) value of the furniture is $5,000 in 2021. Determine the recovery period for the furniture and its depreciation deductions over the recovery period.

Accepted Answer

From Table 7-2, the GDS recovery period is seven years. The MACRS
depreciation deductions from Table 7-3 are the following: $100,000(0.1429) = $14,290 in 2013; $24,490 in 2014; $17,490 in 2015; $12,490 in 2016; $8,930 in 2017; $8,920 in 2018; $8,930 in 2019; and $4,460 in 2020. Notice that salvage value is ignored by MACRS.

TABLE 7-2 MACRS Class Lives and Recovery [latex]\ Periods ^{a} [/latex]
			Recovery Period
Asset Class	Description of Assets	Class Life	[latex]\ GDS^{b}[/latex]	ADS
0.011	Office furniture and equipment	10	7	10
0.012	Information systems, including computers	6	5	5
0.022	Automobiles, taxis	3	5	5
0.023	Buses	9	5	9
0.241	Light general purpose trucks	4	5	5
0.242	Heavy general purpose trucks	6	5	6
0.26	Tractor units for use over the road	4	3	4
1.1	Agriculture	10	7	10
10	Mining	10	7	10
13.2	Production of petroleum and natural gas	14	7	14
13.3	Petroleum refining	16	10	16
15	Construction	6	5	6
22.3	Manufacture of carpets	9	5	9
24.4	Manufacture of wood products and furniture	10	7	10
28	Manufacture of chemicals and allied products	9.5	5	9.5
30.1	Manufacture of rubber products	14	7	14
32.2	Manufacture of cement	20	15	20
34.2	Manufacture of fabricated metal products	12	7	12
36	Manufacture of electronic components,products, and systems	6	5	6
37.11	Manufacture of motor vehicles	12	7	12
37.2	Manufacture of aerospace products	10	7	10
48.12	Telephone central office equipment	18	10	18
49.13	Electric utility steam production plant	28	20	28
49.21	Gas utility distribution facilities	35	20	35
79	Recreation	10	7	10

TABLE 7-3 GDS Recovery Rates [latex]r_{k}[/latex] for the Six Personal Property Classes
Depreciation Rate for Recovery Period
Year	3-year[latex]^{a}[/latex]	5-year[latex]^{a}[/latex]	7-year[latex]^{a}[/latex]	10-year[latex]^{a}[/latex]	15-year[latex]^{b}[/latex]	20-year[latex]^{b}[/latex]
1	0.3333	0.2	0.1429	0.1	0.05	0.0375
2	0.4445	0.32	0.2449	0.18	0.095	0.0722
3	0.1481	0.192	0.1749	0.144	0.0855	0.0668
4	0.0741	0.1152	0.1249	0.1152	0.077	0.0618
5		0.1152	0.0893	0.0922	0.0693	0.0571
6		0.0576	0.0892	0.0737	0.0623	0.0528
7			0.0893	0.0655	0.059	0.0489
8			0.0446	0.0655	0.059	0.0452
9				0.0656	0.0591	0.0447
10				0.0655	0.059	0.0447
11				0.0328	0.0591	0.0446
12					0.059	0.0446
13					0.0591	0.0446
14					0.059	0.0446
15					0.0591	0.0446
16					0.0295	0.0446
17						0.0446
18						0.0446
19						0.0446
20						0.0446
21						0.0223

Question 7.D: Your company purchased office furniture (asset class 00.11) ...

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