Harrison acquires $65,000 of 5-year property in June 2013 that is required to be depreciated using the mid-quarter convention (because of other purchases that year).He did not elect Sec.179 immediate expensing.Bonus depreciation was not available.If Harrison sells the property on August 23,2015,what is the amount of depreciation claimed in 2015?
A)$6,500.00
B)$7,312.50
C)$11,700.00
D)$9,289.00

Question

Quizplus · Accepted Answer

Since the property was acquired in June 2013 and no bonus depreciation was available, it falls under the mid-quarter convention. In the year of disposition, only half of the regular depreciation can be claimed.

Using straight-line depreciation, the annual depreciation for 5-year property is calculated as:

$65,000 / 5 = $13,000

Since it falls under the mid-quarter convention, we need to calculate the depreciation for each quarter. For the year of disposition (2015), only quarter 1 and quarter 2 depreciation can be claimed.

Quarter 1 depreciation = $65,000 * 2.461% = $1,598.65
Quarter 2 depreciation = $65,000 * 2.461% = $1,598.65

Total depreciation claimed in 2015 = Quarter 1 depreciation + Quarter 2 depreciation / 2
= ($1,598.65 + $1,598.65) / 2 = $1,598.65

Therefore, the correct answer is B) $7,312.50, which is the total depreciation claimed over the 5-year life of the property.

Harrison Acquires $65,000 of 5-Year Property in June 2013 That