Which option generates more depreciation deduction

Reference no: EM133537961

Case: Padma needs a new truck to help her expand Padma's Plumbing Palace. Business has been booming and Padma would like to accelerate her tax deductions as much as possible (ignore §179 expense and bonus depreciation for this problem). On April 1, Padma purchased a new delivery van for $30,100.

Option 1: It is now September 26 and Padma, already in need of another vehicle, has found a deal on buying a truck for $25,600 (all fees included). The dealer tells her if she doesn't buy the truck, it will be gone tomorrow.

Option 2: There is an auction scheduled for October 5 where Padma believes she can get a similar truck for $24,500, but there is also a $1,100 auction fee. Padma makes no other asset acquisitions during the year.

a. Which option allows Padma to generate more depreciation deductions this year (the vehicles are not considered to be luxury autos)?

b. Assume the original facts, except that the delivery van was placed in service one day earlier on March 31 rather than April 1. Which option generates more depreciation deduction?

Reference no: EM133537961

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