Final answer:
The claim that cost recovery calculations begin on the asset purchase date is option 2) false. Instead, cost recovery typically starts when an asset is placed in service, ready and available for business use, as per tax accounting principles.
Step-by-step explanation:
The statement that the key date for calculating cost recovery is the date the asset is purchased is false. In the context of tax accounting, cost recovery generally refers to depreciation, amortization, or depletion of an asset over time. The key date for calculating cost recovery is not necessarily the purchase date, but rather the date the asset is placed in service. This is the date when the asset is available and ready for use in a business or income-producing activity.
For example, a company may purchase a piece of machinery, but if it isn't installed and operational until a later date, the cost recovery period will begin when the machine is placed in service. This distinction is important because it can affect the amount of depreciation that can be claimed in any given tax year. Additionally, the Internal Revenue Service (IRS) provides guidelines and methods for how cost recovery should be calculated, including what constitutes the 'placed in service' date. It's crucial for businesses to follow these rules to ensure accurate financial reporting and compliance with tax laws.