Calculate Billie Bob's Depreciation Deduction

Scenario:

Billie Bob purchased a used camera (five-year property) for use in his sole proprietorship in the prior year. The basis of the camera was $2,400. Billie Bob used the camera in his business 60 percent of the time during the first year. During the second year, Billie Bob used the camera 40 percent for business use.

Question:

Calculate Billie Bob's depreciation deduction during the second year, assuming the sole proprietorship had a loss during the year.

Answer:

Depreciation deduction during the second year is:

$192.

Explanation:

a) Data and Calculations:

Property basis value = $2,400

Useful life = 5 years

Depreciable rate per year = $2,400/5 = $480

Depreciation deduction during the second year = $480 * 40% = $192

b) The depreciation deduction for year 2 is limited to the 40% business use.  This implies that Billie Bob cannot claim the 100% depreciation of $480 for the property since he could only use it 40% for his business.