Solaris Industry acquired a 3-year asset for $170,000. It was placed in service

Question

Solaris Industry acquired a 3-year asset for $170,000. It was placed in service in August. This is the only asset the company placed in service during the year. The property was sold in May of Year 3.

Please note: neither the straight-line method nor the 150%-declining balance method was elected. The company elects out of bonus depredation and the Section 179 expense deduction.

What is the depreciation for the year of sale?

(Credit to work shown only)

A.      $9,441

B.      $12,589

C.      $15,736

D.      $25,177

Explanation / Answer

Ans Is B.      $12,589

Explanation: Since straight line and 150% is not used, i.e. Macrs GDS with half year convention rate is used and for 3 year property rate is as follows:

Year

rate

1

33.33%

2

44.45%

3

14.81%

4

7.41%

For year 3 rate is 14.81% and since disposition year also 3 so rate used will be just halved, 14.81% x 170000 x ½ = $12,588.50 or $12,589

Year

rate

1

33.33%

2

44.45%

3

14.81%

4

7.41%

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