Question

An asset (not an automobile) put in service in june 2022 has a depreciable basis of $1,065,000, a recovery period of 5 years, and is the only asset placed in service during the year. assuming bonus depreciation is used, a half-year convention, and the expensing election is made, what is the maximum amount of cost that can be deducted in 2022 (assume no income limitation)? group of answer choices

a. $211,000
b. $500,000
c. $1,065,000
d. $1,040,000
e. $1,050,000

Answer 1

The maximum amount of cost that can be deducted in 2022 for an asset with a depreciable basis of $1,065,000 is $532,500.

Step-by-step explanation:

To calculate the maximum amount of cost that can be deducted in 2022, we need to consider the bonus depreciation, half-year convention, and the expensing election. In this case, the asset has a depreciable basis of $1,065,000 and a recovery period of 5 years. The bonus depreciation allows for immediate expensing of 100% of the asset's cost. However, we need to consider the half-year convention, which means we can only deduct half of the cost in the first year.

The maximum amount of cost that can be deducted in 2022, taking into account these factors, is calculated as follows:

1. Half of the depreciable basis: $1,065,000 / 2 = $532,500
2. Apply bonus depreciation: $532,500 * 100% = $532,500

Therefore, the maximum amount of cost that can be deducted in 2022 is $532,500.