Question

Juan, a sole proprietor, acquires a new 5-year class asset on March 14, 2019, for $200,000. This is the only asset Juan acquired during the year. He does not elect immediate expensing under Section 179. Juan does not claim any available additional first-year depreciation. On July 15, 2020, Juan sells the asset a. Determine Juan’s cost recovery for 2019 b. Determine Juan’s cost recovery for 2020.

Answer 1

The answers are:

A) $40,000

B) $32,000

Step-by-step explanation:

Juan's recovery cost for 2019 can be calculated by multiplying the total asset cost by 20%: $200,000 x 20% = $40,000

Juan's recovery cost for 2020 can be calculated by multiplying the total asset cost by 32% and then divide it by 2: ($200,000 x 32%) / 2 = $32,000