On May 15,2013,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 first-year depreciation.Determine the cost recovery deduction for 2013.

Question

Quizplus · Accepted Answer

Since Brent did not elect to expense assets under §179, he has to use the Modified Accelerated Cost Recovery System (MACRS), which is a method of cost recovery under the tax code. The equipment purchased would fall under the category of 7-year property for MACRS purposes. The depreciation deduction for 2013 is calculated by multiplying the cost of the equipment ($200,000) by the percentage allowed for the first year of 7-year property, which is 10.5%. Therefore, the cost recovery deduction for 2013 would be $21,000 ($200,000 x 10.5%).

On May 15,2013,Brent Purchased New Farm Equipment for $200,000