VIPSolutionsHamlet places in service a 7 - year class asset on November 2 3 , 2 0 2 4 , for $ 2 1 4 , 2 0 0 ( the only asset acquired during the year ) . Hamlet does not elect immediate expensing under § 1 7 9 . He does not claim any available additional first year depreciation. This is Hamlet's only tangible personal property acquisition for the year. Calculate Hamlet's cost recovery deduction for 2 0 2 4 and 2 0 2 5 . explain and give final summary
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Hamlet places in service a 7 - year class asset on November 2 3 , 2 0 2 4 , for $ 2 1 4 , 2 0 0 ( the only asset acquired during the year ) . Hamlet does not elect immediate expensing under § 1 7 9 . He does not claim any available additional first year depreciation. This is Hamlet's only tangible personal property acquisition for the year. Calculate Hamlet's cost recovery deduction for 2 0 2 4 and 2 0 2 5 . explain and give final summary
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Asked by: sreegeeth
Created at: 2025-07-26 12:34:07
Asked by: sreegeeth
Created at: 2025-07-26 12:34:07
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Let's break down the problem step by step:
### **Facts Given**
- **Asset:** 7-year class asset (MACRS 200% declining balance)
- **Placed in Service:** November 23, 2024 (4th quarter)
- **Cost:** $214,200
- **Section 179:** Not elected
- **Bonus Depreciation:** Not claimed
- **Only acquisition in 2024**
### **Step 1: Determine Depreciation Method and Convention**
- **Depreciation Method:** MACRS 200% Declining Balance
- **Convention:** Since the asset was placed in service in the 4th quarter, the **mid-quarter convention** applies (since this is the only asset purchased).
### **Step 2: Find MACRS Depreciation Percentages**
For a 7-year asset under the **mid-quarter convention**, refer to IRS Publication 946, Table A-2 (4th Quarter).
#### **MACRS Mid-Quarter Convention Table – 7-Year Property**
- **Year 1 (2024):** 3.57%
- **Year 2 (2025):** 31.43%
### **Step 3: Calculate Deductions**
#### **2024 (Year 1)**
- **Depreciation Rate:** 3.57%
- **Deduction:** $214,200 × 3.57% = **$7,645.74**
#### **2025 (Year 2)**
- **Depreciation Rate:** 31.43%
- **Deduction:** $214,200 × 31.43% = **$67,337.06**
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## **Summary Table**
| Year | Depreciation Rate | Deduction |
|--------|-------------------|--------------|
| 2024 | 3.57% | $7,645.74 |
| 2025 | 31.43% | $67,337.06 |
---
## **Explanation**
- Because Hamlet only acquired one asset and it was placed in service in the 4th quarter, the mid-quarter convention applies, which significantly reduces the first-year depreciation.
- No §179 or bonus depreciation was taken.
- The MACRS mid-quarter rates (from IRS tables) for 7-year property placed in service in the 4th quarter are 3.57% (Year 1) and 31.43% (Year 2).
---
## **Final Answer**
**Hamlet's cost recovery deduction is $7,645.74 for 2024 and $67,337.06 for 2025.**
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