Grape Corporation purchased a machine in December of the current year. This was the only asset purchased during the current year. The machine was placed in service in January of the following year. No assets were purchased in the following year. Grape Corporation's cost recovery would begin:
A) In the current year using a mid-quarter convention.
B) In the current year using a half-year convention.
C) In the following year using a mid-quarter convention.
D) In the following year using a half-year convention.
E) None of the above.

Question

Quizplus · Accepted Answer

Cost recovery begins in the year the asset is placed in service, which is the following year. Since no other assets were purchased, the half-year convention applies.

Grape Corporation Purchased a Machine in December of the Current