Pat purchased a used five-year class asset on March 15,2015,for $60,000.He did not elect § 179 expensing.Determine the cost recovery deduction for 2015 for earnings and profits purposes.
A)$2,000
B)$3,000
C)$6,000
D)$12,000
E)None of the above

Question

Quizplus · Accepted Answer

Since Pat did not elect § 179 expensing, he will use the Modified Accelerated Cost Recovery System (MACRS) to recover the cost of the asset. For a used five-year class asset placed in service in 2015, the recovery period is 5 years and the depreciation method is the 200% declining balance method, switched to the straight-line method. Using this method, Pat's cost recovery deduction for 2015 would be $6,000 (20% of $60,000).

Pat Purchased a Used Five-Year Class Asset on March 15,2015,for