Stewart purchased and placed in service a 5 year asset on November 23, 2018. It cost...

Stewart purchased and placed in service a 5 year asset on November 23, 2018. It cost $100,000. He sold the asset on February 19, 2019. Determine his depreciation deduction for 2019

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Expert Solution

Based on the information available in the question, we can answer as follows:-

Steward has purchased the asset on November 23, 2018 for $100,000. The asset is a 5 year class life asset. Since the asset is placed during the 4th quarter of the 2018 year, the asset will be depreciated using the MACRS Mid Quarter convention .

When an asset is depreciated using the Mid quarter convention and is sold during the first quarter of the year, the depreciation cost recovery is limited to 12.5% of the actual cost recovery during the year. As such, Stewart's Depreciation for 2019 is :-

$100,000 * 38% * 12.5% = $4,750

The 38% here refers to the Depreciation to the MACRS depreciation percentage for the 2nd year per IRS Mid Quarter Convention, Asset placed in service in fourth quarter table.

Depreciation deduction for 2019 - $4,750

Please let me know if you have any questions via comments and all the best :) !

ekkarill92 answered 6 months ago

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