Where the above is given, note that the cost of recovery is None of the above (Option D)
Total deduction refers to the overall amount subtracted from gross income to calculate taxable income, encompassing various eligible expenses, credits, or allowances allowed by tax regulations.
MACRS (Modified Accelerated Cost Recovery System) is a tax depreciation method for recovering the cost of tangible property over specific periods.
To compute the cost of recovery:
Annual Depreciation - The improvements have a cost of $300,000 and a useful life of 15 years.
So, the annual depreciation is
$300,000 / 15
= $20,000.
Deduction for 2017 - Since the improvements were made in August, there are 8 months remaining in the year.
Therefore, the deduction for 2017 is $20,000 x (8 / 12)
= $13,333.33.
Thus, option D is the right answer.
Full Question:
Although part of your question is missing, you might be referring to this full question:
On May 30, 2016, Jane purchased a factory building to use for her business. In August 2017, Jane paid $300,000 for improvements to the building. Determine Jane's total deduction with respect to the building improvements for 2017.
a. $25,000
b. $2,889
c. $4,815
d. $4,173
e. None of these choices are correct.