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2. Iris placed in service a new business asset (five-year property) on November 30, 2017, at...

2. Iris placed in service a new business asset (five-year property) on November 30, 2017, at a cost of $100,000. This was the only asset acquired by Iris during 2017. She did NOT elect to expense any of the asset cost under § 179. Iris elected OUT of bonus depreciation (therefore no additional first year depreciation).

(a) Determine her cost recovery for 2017.

(b) Determine cost recovery in 2018 (year 2)

(c) Determine cost recovery in 2017 if bonus depreciation had been used.

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Answer #1

A) In 2017 iris can only recover half depreciation as an expense on the asset purcahse because it was purchased on 30 nov 2017(used for less then 180days). For eg if depreciation rate is 15% then only 7.5% of $100000 =$7500 shall be allowed if iris is following wdv method of depreciation.

B) In 2018 iris can recover full depreciation of a year on remaining balance of asset. For eg in case of wdv method of depreciation, depreciation shall be calculated on $92500.i.e 92500*15%=$13875.iris can recover $13875 in year2.

C) In 2017 if bonus depreciation has been used then iris can recover depreciation at half rate of additional depreciation along with normal depretion as an expense .

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