Asked by Sienna Capellas on May 14, 2024
Verified
Kiri acquires equipment (7-year property)on August 14,2017,for $80,000.She does not elect to expense the asset under Section 179 or the 50% bonus.She sells the asset on January 15,2021.
a.What is Kiri's cost recovery deduction related to the equipment in 2017 and 2021?
b.What is Kiri's cost recovery deduction related to the equipment in 2017 and 2021 if the 50% bonus is elected?
Cost Recovery Deduction
A tax deduction that allows a taxpayer to recover the cost of an investment over time through depreciation, amortization, or depletion.
50% Bonus
A premium payment of half the worth of an item, salary, or stipulated amount as an additional reward.
- Learn about the core principles of cost recovery deductions and their utilization for diverse types of assets.
- Determine and compute the highest permissible deduction amounts according to Section 179 and additional depreciation.
- Gain an understanding of the essential theories of depreciation, considering the standards and procedures pertinent to diverse kinds of assets.
Verified Answer
AL
Ashley LachapelleMay 17, 2024
Final Answer :
a.2017 - $80,000 × .1429 = $11,432 7-yr MACRS first year.
2021 - $80,000 × .0893 × ½ = $3,572 7-yr MACRS fifth year.
b.2017- $80,000 × 50% = $40,000 first year + ($40,000 × 14.29%)= $45,716.
2021 - $40,000 × .0893 × ½ = $1,786 fifth year.
2021 - $80,000 × .0893 × ½ = $3,572 7-yr MACRS fifth year.
b.2017- $80,000 × 50% = $40,000 first year + ($40,000 × 14.29%)= $45,716.
2021 - $40,000 × .0893 × ½ = $1,786 fifth year.
Learning Objectives
- Learn about the core principles of cost recovery deductions and their utilization for diverse types of assets.
- Determine and compute the highest permissible deduction amounts according to Section 179 and additional depreciation.
- Gain an understanding of the essential theories of depreciation, considering the standards and procedures pertinent to diverse kinds of assets.
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