On July 1, 2014, Rex purchases a new automobile for $40,000. He uses the car 80% for business and drives the car as follows: 8,000 miles in 2014, 19,000 miles in 2015, 20,000 miles in 2016, and 15,000 miles in 2017. Determine Rex's basis in the business portion of the auto as of January 1, 2018, 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.

2014: $

2015: $

2016: $

2017: $

Rex's adjusted basis in the auto on January 1, 2018, is $

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 2014 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: $

2017: $

Rex's adjusted basis in the auto on January 1, 2018, is $

Expert Answer

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