Final answer:
Yancy's cost recovery deduction for a three-year personalty business asset purchased on July 23, 2015, at a cost of $40,000 without additional first-year depreciation would be 33.33% of the cost. This equates to a deduction of $13,332 for the year 2015, which corresponds to option 4 provided in the question.
Therefore, option 4 is correct.
Step-by-step explanation:
The question asked is about calculating the cost recovery deduction for a new business asset in accordance with tax rules. To determine the cost recovery deduction for the year of purchase, one must use the Modified Accelerated Cost Recovery System (MACRS) that applies to the property. Given that the asset is three-year personalty and there is no use of additional first-year depreciation, one would typically reference the MACRS table for a half-year convention (as the asset was purchased in July) to determine the appropriate percentage to apply for the first year.
According to MACRS, for three-year personalty under a half-year convention, the first year depreciation rate is 33.33%. Therefore, Yancy's cost recovery deduction for 2015 would be 33.33% of $40,000, which equals $13,332. This calculation is performed by multiplying the cost of the asset by the depreciation rate for the first year. Given the options provided, option 4 ($13,332) would be the correct answer.
It is important to note that tax laws and depreciation schedules can change, and this answer is based on the information as of the knowledge cutoff date. Always consult the current IRS guidelines or a tax professional for the most up-to-date information.