Final answer:
Diana's five-year class asset would be subjected to a first-year depreciation deduction using the MACRS method, prorated to 1.5 months of service for 2022, resulting in a deduction of $1,625.
Step-by-step explanation:
Diana's situation pertains to the business and tax concept of asset depreciation, specifically the election of additional first-year deprecation for a 5-year class asset. Since Diana opts for additional first-year depreciation, the calculation would involve the Modified Accelerated Cost Recovery System (MACRS) which allows for a 200% declining balance method on five-year property. Given that Diana placed the asset in service close to the year's end, her first-year depreciation deduction will be prorated based on the mid-quarter convention as it's the only asset acquired and it was placed in service in the last quarter of the tax year.
Main Answer:
The main answer to this question would be the computed depreciation deduction for her 5-year class asset using the MACRS table for 5-year property. She would take 20% of the asset's cost as first-year depreciation but, due to the mid-quarter convention, multiply it by 1.5 months/12 months since it was in service for only a part of December. Therefore, the first-year depreciation amount would be $1,625 (which is $65,000 x 20% x 1.5/12).