To use regular MACRS, listed property must be used more than 50% in a trade or business use.  Lurlene’s automobile is listed property and her business usage is 75% (9,000  ¸  12,000 miles).  Lurlene could elect to expense the car under Section 179; however, this is not a good choice since the deduction is subject to the passenger automobile limitation.  Automobiles are 5-year property and regular MACRS depreciation is calculated using Table A10-2.  The deduction is limited to $2,220 in 2006.

Initial basis                                                               $17,000

Business use percentage                                         x       75%

Business depreciable basis                                      $12,750

MACRS % (Table A10-2)                                           x       20%

Total MACRS depreciation                             $  2,550

Annual depreciation limit for auto (Table A10-10)                      $2,960

Lurlene’s business use percentage                                             x     75%

Lurlene’s maximum depreciation on auto in 2006                       $2,220

Instructor’s Note:  After the book went to press the 2007 maximum deduction limitations were released.  The 2007 maximum deduction also is $3,060.  However, the limit for minivans and SUV’s is $3,260.