Harrison acquires $65,000 of 5-year property in June 2017 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 23,2019,what is the amount of depreciation claimed in 2019?
A)$6,500.00
B)$7,312.50
C)$11,700.00
D)$9,289.00

Question

Quizplus · Accepted Answer

Using the mid-quarter convention, the property is assumed to be placed in service in the middle of the quarter in which it was acquired. Therefore, Harrison's property is assumed to be placed in service on July 1, 2017 (middle of the second quarter), and the first year of depreciation is from July 1, 2017, to December 31, 2017. Since it was not elected for Sec.179 immediate expensing and bonus depreciation was not available, the depreciation for the first year would be $65,000/5 = $13,000.
Similarly, the second-year depreciation would also be $13,000 (since the mid-quarter convention doesn't affect it), and the third-year depreciation would be:

($65,000 - $13,000 - $13,000) x 0.15 (i.e. 15%, the rate for 5 year property) = $6,825

Depreciation claimed in 2019 would be for the period from January 1, 2019, to August 23, 2019 (the date of sale). This would be:

($65,000 - $13,000 - $13,000 - $6,825) x 0.15 x (224/365)

= $7,312.50 (rounded to the nearest cent)

Therefore, the best choice is B.

Harrison Acquires $65,000 of 5-Year Property in June 2017 That