Hazel purchased a new business asset (five-year asset)on September 30,2016,at a cost of $100,000.On October 4,2016,Hazel placed the asset in service.This was the only asset Hazel placed in service in 2016.Hazel did not elect § 179 or additional first-year depreciation if available.On August 20,2017,Hazel sold the asset.Determine the cost recovery for 2017 for the asset.
A)$14,250
B)$19,000
C)$23,750
D)$38,000
E)None of the above

Question

Quizplus · Accepted Answer

Since the asset was placed in service on October 4, 2016, the recovery period for 2016 was only 1/12th of the scheduled recovery period of 5 years or 0.417. Hazel did not elect any bonus or accelerated depreciation. Therefore, the cost recovery for 2016 was:
$100,000 × 0.417 × 20% = $8,340
Since the asset was sold on August 20, 2017, Hazel would have used the asset for 10/12th of the scheduled recovery period or 0.833. The cost recovery for 2017 is calculated as follows:
$100,000 × 0.833 × 20% = $16,660
Thus, the total cost recovery for the asset is $8,340 + $16,660 = $23,750. Therefore, the correct answer is (C).

Hazel Purchased a New Business Asset (Five-Year Asset)on September 30,2016,at