Straight-Line Example
For a $14,000 truck placed in service on March 16, 2007, with an estimated life of 6 years and a salvage value of $2,000, the depreciation calculation for the straight-line method looks like this:
|
|
Original cost |
$14,000 |
|
- |
Salvage value |
2,000 |
|
|
Adjusted basis |
$12,000 |
|
Adjusted basis
|
= |
$12,000
|
= $2,000 |
Yearly depreciation is $2,000 for the years 2008 through 2012. Under the midmonth convention, the truck is considered to be placed in service in April, so the acquisition year depreciation is 9/12ths of the annual depreciation ($1,500). The deduction for the last year is 3/12ths of the annual depreciation ($500).