In June 2017,Kelly purchased new equipment for $26,000 to be used in her business.Assuming Kelly has net income from her business of $75,000 prior to the deduction,what is the maximum amount of cost recovery Kelly can deduct rounded to the nearest dollar,assuming she does not elect §179 expense or bonus depreciation?

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Quizplus · Accepted Answer

The maximum amount of cost recovery Kelly can deduct, assuming she does not elect §179 expense or bonus depreciation, is determined by the Modified Accelerated Cost Recovery System (MACRS). For most new business equipment, a 5-year recovery period is typical. The first-year depreciation rate for 5-year property under the half-year convention (which is commonly applied) is 20%. Therefore, the maximum deduction for the first year is 20% of $26,000, which equals $5,200. However, since the question does not specify the recovery period or convention explicitly, and without more specific information about the type of equipment or any elections made, the answer provided is based on a general understanding of cost recovery under the U.S. tax code. Given the options provided and the general principle of depreciation, none of the answers directly correspond to the calculated $5,200, suggesting a possible misunderstanding in the question's premise or a need for more specific information regarding the applicable recovery period or additional tax provisions that might apply.

In June 2017,Kelly Purchased New Equipment for $26,000 to Be