Hazel purchased a new business asset (five-year asset) on September 30, 2018, at a cost of $100,000. On October 4, 2018, Hazel placed the asset in service. This was the only asset Hazel placed in service in 2018. Hazel did not elect § 179 or additional first-year depreciation. On August 20, 2019, Hazel sold the asset. Determine the cost recovery for 2019 for the asset.

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Business

Erica

1 May, 05:18

Hazel purchased a new business asset (five-year asset) on September 30, 2018, at a cost of $100,000. On October 4, 2018, Hazel placed the asset in service. This was the only asset Hazel placed in service in 2018. Hazel did not elect § 179 or additional first-year depreciation. On August 20, 2019, Hazel sold the asset. Determine the cost recovery for 2019 for the asset.

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Paxton Butler · Answer 1

the cost of recovery for 2019 would be $23,750.

Explanation:

hazel purchased this asset on September 30, 2018 and placed the asset in service on October 4, 2018, so here mid quarter convention is gonna be used.

The percentage of MACRS rate as per mid quarter convention is 38% for the last quarter, so the cost of recovery for deduction can be calculated as -

= $100,000 x 38% x 2.5/4

= $100,000 x 38/100 x 2.5/4

= $23,750

Therefore cost of recovery deduction for hazel would be $23,750.