On May 15, 2014, Brent purchased new farm equipment for $200,000. Brent used the equipment in connection with his farming business. Brent does not elect to expense assets under § 179. Brent does not take additional firstyear depreciation (if available). Determine the cost recovery deduction for 2014.

Question

On May 15, 2014, Brent purchased new farm equipment for $200,000. Brent used the equipment in connection with his farming business. Brent does not elect to expense assets under § 179. Brent does not take additional first­year depreciation (if available). Determine the cost recovery deduction for 2014.

Quizplus · Accepted Answer

The farm equipment is classified as 7-year property for MACRS depreciation purposes. The applicable MACRS percentages for 7-year property for the first four years are 14.29%, 24.49%, 17.49%, and 12.49%. Therefore, the cost recovery deduction for 2014 is calculated as:

$200,000 x 14.29% = $28,580

However, there is a half-year convention for assets placed in service during the year for MACRS. This means that only half of the full-year percentage can be claimed in the first year, which results in a cost recovery deduction of:

$28,580 / 2 = $14,290

Therefore, the correct answer is B.

On May 15, 2014, Brent Purchased New Farm Equipment for $200,000