John converted to business use a desk and chair (furniture) he had purchased in 1996 for personal purposes. In 1996, he paid $1,500 for them. The total fair market value in 2003 is $550. The fair market value is less than the cost, so his depreciable basis is $550.
Because the furniture is 7-year property under MACRS, John enters $550 in Part III, line 19c, column (c). He completes columns (d) through (f). He uses the MACRS Percentage Table for 5- and 7-Year Property Using Half-Year Convention or Table A-1 in Publication 946 (pdf) to find the rate of 14.29% for property placed in service during the first month of the year. He multiplies $550 by 14.29% (.1429) and enters $79 in column (g).
Form 4562 Example
Form 4562, Part I, lines 1-13
Form 4562, Part III, line 19c
Form 4562, Part III, line 19i
Form 4562, Part IV, line 22
Schedule C Example
Schedule C, Line 13
Schedule C, Line 16b
Schedule C, Line 25
Schedule C, Lines 28-30
Form 8829 Example
Form 8829, Part II, Step 1
Form 8829, Part II, Step 2
Form 8829, Part II, Step 3
Form 8829, Part II, Step 4
Information courtesy of the Internal Revenue Service.
