Hazel purchased a new business asset (five-year asset)on September 30,2013,at a cost of $100,000.On October 4,2013,Hazel placed the asset in service.This was the only asset Hazel placed in service in 2013.The only election with respect to the asset was not to take § 179.On August 20,2014,Hazel sold the asset.Determine the cost recovery for 2014 for the asset.

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Quizplus · Accepted Answer

Since the asset was placed in service on October 4,2013, it was in service for 88 days in 2013 (Oct 4 to Dec 31). Using the half-year convention, the depreciation for 2013 is calculated as $100,000 * 1/2 * 200% = $10,000. For 2014, the asset is a four-year asset and is depreciated using the 200% declining balance method. The depreciation for 2014 is calculated as ($100,000 - $10,000) * 1/2 * 200% = $11,875. Therefore, the cost recovery for 2014 is $11,875.

Hazel Purchased a New Business Asset (Five-Year Asset)on September 30,2013,at