Question

32. LO.2 Juan acquires a new 5-year class asset on March 14, 2020, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under 8.179. He does not claim any available additional first-year depre- ciation. On July 15, 2021, Juan sells the asset. Determine Juan's cost recovery for 2020. b. Determine Juan's cost recovery for 2021. a. 33L02 Tebrired the followin

Answer 1

A. 200,000 * 20%= 40,000

B. (200,000 * 32%) / 2 = 32,000

Answer 2

Requirement A:-

Since this is the only asset placed in service by Juan and the company has not placed more than 40% of the assets during the last quarter for the year, we will follow the MACRS Half Yearly convention method to depreciate the assets.

Based on the information available in the question, we can answer as follows:-

Juan's cost recovery for 2020 = $200,000 * 20% = $40,000

Juan's cost recovery for 2020 = $40,000

Requirement B:-

Juan's cost recovery for 2021 = $200,000 * 32% * 50% = $20,000

Juan's cost recovery for 2021 = $32,000

Since the asset is sold during the year, Per IRS, when a machine is depreciated using the MACRS Half Yearly convention method, the actual depreciation expense would be limited to 50% during the year of sale.

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