Question

James purchased a new business asset (three-year personalty) on July 23, 2017, at a cost of $40,000. James takes additional first-year depreciation but does not elect Section 179 expense on the asset. Determine the cost recovery deduction for 2017

a. $8,333
b. $26,666
c. $33,333
d. $41,665

Answer 1

b. $26,666

Step-by-step explanation:

Additional first-year depreciation =40000*0.5 = 20000

MACRS cost recovery = (40000-20000)*0.3333 = 6666

Total cost recovery deduction for 2017= 20000+6000 = 26666