James purchased a new business asset (three-year personalty)on July 23,2016,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 2016.
A)$8,333
B)$26,666
C)$33,333
D)$41,665
E)None of the above

Question

Quizplus · Accepted Answer

The cost recovery deduction for the first year is determined by taking the applicable percentage of the cost of the asset. The applicable percentage for three-year personalty placed in service in 2016 is 33.33%. Therefore, the cost recovery deduction for 2016 is $40,000 x 33.33% = $13,332. However, since James takes additional first-year depreciation, the deduction is increased to $40,000 x 50% x 33.33% = $26,666. Option B is the closest to this value.

James Purchased a New Business Asset (Three-Year Personalty)on July 23,2016,at