Question

Tan Company acquired a new machine (five-year property) on January 15, 2018, at a cost of...

Tan Company acquired a new machine (five-year property) on January 15, 2018, at a cost of $40,000. Tan also acquired another new machine (five-year property) on November 5, 2018, at a cost of $200,000. Both assets were placed in service immediately, and Tan acquired no other assets during the year. No election was made to use the straight-line method. The company did not make the IRC § 179 election and elected not to take additional first-year depreciation. Determine the total cost recovery deductions in calculating taxable income related to the machines for the calendar 2019 taxable year.

a. $24,000

b. $25,716

c. $45,716

d. $48,000

e. $86,400

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Answer #1
Basis B Qtr in which placed in service Class of property Dep rate D Dep Exp B*D
40000 1 5 35% 14000
200000 4 5 5% 10000
24000
As more than 40% of total assets are placed in service in last quarter hence
mid quarter convention is used
200000/240000*100 83.3 %
Option A $24000 is cost recovery deduction
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