James purchased a new business asset (three-year personalty) on July 23,2015,at a cost of $40,000.James takes additional first-year depreciation but does not elect Section 179 expense on the asset.Determine the cost recovery deduction for 2015.
A)$8,333
B)$26,666
C)$33,333
D)$41,665
E)None of the above

Question

Quizplus · Accepted Answer

The three-year property falls under the category of 33.33% MACRS depreciation.
Since the asset was purchased on July 23, 2015, it will be in service for 161 days (out of 365 days) in 2015.
Therefore, the depreciation allowed for 2015 would be (40,000 * 0.3333 * 161/365) = $8,889.
However, we need to add the additional first-year depreciation of 50% on this asset.
So, the cost recovery deduction for 2015 would be (8,889 * 1.5) = $13,333.
Therefore, the correct answer is option B.

James Purchased a New Business Asset (Three-Year Personalty) on July