George purchases used office furniture (seven-year class property)at a cost of $50,000 on April 20,2010.Determine George's cost recovery deduction for 2010 for alternative minimum tax purposes,assuming George does not elect § 179 and the maximum cost recovery deduction is taken for regular income tax purposes.

Question

Quizplus · Accepted Answer

The cost recovery deduction for alternative minimum tax purposes is calculated using the alternative depreciation system (ADS) and a longer recovery period than the regular depreciation system.

For seven-year property placed in service before January 1, 2018, the ADS recovery period is 10 years. Therefore, the annual depreciation deduction for George's used office furniture would be $5,000 ($50,000/10) for regular income tax purposes.

For alternative minimum tax purposes, the annual depreciation deduction would be the same as the regular tax deduction if the maximum deduction was taken. However, if the maximum deduction was not taken, the ADS percentage for seven-year property is 14.29%.

Therefore, George's cost recovery deduction for 2010 for alternative minimum tax purposes would be $5,355 ($50,000 x 14.29%).

The correct answer is C.

George Purchases Used Office Furniture (Seven-Year Class Property)at a Cost