Howard's business is raising and harvesting peaches.On March 10,2013,Howard purchased 10,000 new peach trees at a cost of $60,000.Howard does not elect to expense assets under § 179.If eligible,Howard takes additional first-year depreciation.Determine the cost recovery deduction for 2013.

Question

Quizplus · Accepted Answer

Since Howard did not elect to use § 179, the cost of the peach trees must be depreciated over a period of 15 years using the straight-line method. Therefore, the annual depreciation would be $60,000/15 = $4,000. However, Howard may also be eligible for additional first-year depreciation, which is 50% of the cost of the peach trees, or $30,000. This would bring the total cost recovery deduction for 2013 to $34,000 ($4,000 + $30,000). However, the question only asks for the cost recovery deduction, so the correct answer would be $31,500 ($4,000 x 7.875).

Howard's Business Is Raising and Harvesting Peaches