Juan acquires a new five-year class asset on March 14, 2011 for $150,000. This i

Question

Juan acquires a new five-year class asset on March 14, 2011 for $150,000. This is the only asset he acquired and does not elect immediate expensing or additional first-year depreciation. On July 15, 2012 the asset is sold. Determine the recovery for years 2011 and 2012.

In some instances it needs to be determined if 40% of the asset was placed into service in the fourth quarter, but this asset was acquired in the 1st quarter 2011. I keep getting confused on what table to use to get the applicable percentages.

Explanation / Answer

MACRS Depreciation Rates Recovery 5- Year 200% DB 1 20 2 32 3 19.2 4 11.52 5 11.52 MACRS Depreciation Recovery for the year 2011 $150,000 x 0.20 = $30,000 Recovery for the year 2012 $150,000 x 0.32= $48,000 Cost of the asset $150,000 40% of the asset = $150,000*40%=$60,000 But the asset was acquired in the 1st quarter The asset cost in the 1st quarter = $60,000/  4                                                  = $15,000 MACRS Depreciation Rates Recovery 5- Year 200% DB 1 20 2 32 3 19.2 4 11.52 5 11.52 MACRS Depreciation Recovery for the year 2011 $150,000 x 0.20 = $30,000 Recovery for the year 2012 $150,000 x 0.32= $48,000

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