Final answer:
The recovery period of an asset is determined mainly by the asset’s useful life and is specifically outlined in Revenue Procedure 87-56, which is under the Modified Accelerated Cost Recovery System (MACRS).
Step-by-step explanation:
The recovery period of an asset is determined by the asset’s estimated useful life, as guided by Treasury regulations and the Internal Revenue Code. Specifically, the Modified Accelerated Cost Recovery System (MACRS) is the current method of accelerated asset depreciation in the United States, and it is outlined in the Internal Revenue Code Section 168. Under MACRS, different types of assets are assigned specific depreciation periods that are detailed in Revenue Procedure 87-56.
Therefore, the correct answer to how the recovery period of an asset is determined would be C. Revenue Procedure 87-56, which provides the asset depreciation ranges and recovery periods for different classes of assets.