Wu Copy Shop purchases a new copy machine in July 2014 for $30,000. No other depreciable assets are placed in service in 2014. Since Wu Copy Shop expects to be in a much higher tax bracket in future years, it desires to minimize its current cost recovery amount to the fullest extent possible. What is the amount of Wu Copy Shop's ADS depreciation for 2014?
A) $1,500
B) $3,000
C) $4,500
D) $5,400
E) $6,000

Question

Quizplus · Accepted Answer

The ADS (Alternative Depreciation System) for a copy machine typically uses a 9-year recovery period. For 2014, the depreciation would be calculated as $30,000 / 9 years = $3,333.33 per year. However, since the machine was placed in service in July, only half-year depreciation is allowed, resulting in $1,666.67. The closest option is $1,500, which suggests a rounding or specific tax rule adjustment.

Wu Copy Shop Purchases a New Copy Machine in July