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Euclid acquires a 7-year class asset on May 9, 2019, for $176,500 (the only asset acquired during the year). Euclid does not elect immediate expensing under § 179. He does not claim any available additional first-year depreciation. Calculate Euclid's cost recovery deduction for 2019 and 2020.

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Solution and Explanation:

Calculation of Elucid’s cost of recovery deduction for the year 2019 and 2020

Cost of recovery deduction for 2019 = Assets value * depreciation rate for the first year

[tex]=176500 * 14.29 \text { percent }[/tex] ( it has calculated by using MACR table)

= $ 25221.85

Therefore, the cost of recovery of deduction in 2019 is $25221.85

Cost of recovery deduction for 2020 = Assets value * depreciation rate for the first year

[tex]=\$ 176500 * 24.29 \text { percent }[/tex] ( it has calculated by using MACR table)

= $42871.85

Therefore, the cost of recovery of deduction in 2020 is $42871.85

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