Question :
Part 1:
The Tim Cost Recovery Corporation (Tim) purchased and placed in service the subsequent depreciable property in 2012:
Property Placed In Service Date Cost
5-year property January 10, 2012 2,000
7-year property April 1, 2012 2,000
5-year property August 21,2012 2,000
3-year property December 1, 2012 10,000
Required:
1. Evaluate Tim's 2012 cost recovery deduction (Consider Tim did not make a section 179 election and elected out of bonus depreciation). Show your work and describe your calculations.
2. Tim purchased and placed in service the subsequent depreciable property in 2013.
Property Placed in Service Date Cost
5-year property January 1, 2013 4,000
5-year property December 1, 2013 1,000
New Warehouse September 2, 2013 400,000*
*50,000 of the 400,000 purchase price was allocated to the land.
Evaluate Tim's 2013 cost recovery deduction (consider Tim did not make a section 179 election and elected out of bonus depreciation). Determine the total cost recovery deduction (on both 2012 and 2013 assets).
3. Tim sold the 3-year property (purchased in 2012) on February 27, 2014 for 7,000. Determine (1) Tim's 2014 cost recovery deduction; and (2) the amount and character of profit or loss on the sale of the 3-year property.
Part 2:
Reevaluate your answers to Part 1 (questions 1 and 2) assuming that Tim Corporation did not elect to expense any amount under section 179 but did not elect out of bonus depreciation for both 2012 and 2013 (i.e., Tim Corporation took advantage of bonus depreciation in 2012 and 2013). Evaluate Tim's