Barry purchased a used business asset (seven-year property) on September 30,2015,at a cost of $200,000.This is the only asset he purchased during the year.Barry did not elect to expense any of the asset under § 179,did not take additional first-year depreciation (if available),and did not elect straight-line cost recovery.Barry sold the asset on July 17,2016.Determine the cost recovery deduction for 2016.
A)$19,133
B)$24,490
C)$34,438
D)$55,100
E)None of the above

Question

Quizplus · Accepted Answer

Since Barry did not elect to expense any of the asset under § 179, did not take additional first-year depreciation and did not elect straight-line cost recovery, the asset is depreciated under the Modified Accelerated Cost Recovery System (MACRS) over a seven-year recovery period.

The asset was placed in service on September 30, 2015, so it has been in service for 9 months in 2015 (October through December) and 6 months in 2016 (January through June).

Using the MACRS tables, the depreciation deduction for year 1 is calculated as follows:

Year 1: ((200,000 x 1.39)/7) x (9/12) = $24,490

Therefore, the cost recovery deduction for 2016 is $24,490. Option (B) is the correct answer.

Barry Purchased a Used Business Asset (Seven-Year Property) on September