Pat purchased a used five-year class asset on March 15,2011,for $60,000.He did not elect § 179 expensing.Determine the cost recovery deduction for 2011 for earnings and profits purposes.

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The asset in question is a 5-year property. Straight-line depreciation must be used and the mid-month convention is assumed. Therefore, the annual depreciation is $60,000/5 = $12,000. Because Pat placed the asset in service on March 15, he can only claim 10.5 months' depreciation in the first year (i.e. March 15 to December 31). The depreciation for 2011 is $12,000 × 10.5/12 = $6,000.

Pat Purchased a Used Five-Year Class Asset on March 15,2011,for