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Durna Inc., a calendar year taxpayer, made two asset purchases this year. The first purchase was a machine costing $874,000, and the second purchase was equipment costing $660,000. Both assets are 7-year recovery property. Durna placed the machine in service on March 27 and the equipment in service on December 14. How many months of MACRS depreciation is Durna allowed for each asset this year?

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Answer:

For the depreciation of both the machine and equipment, Durna is only allowed 10.5 months and 1.5 months respectively.

Explanation:

Solution

Recall that:

Durna Inc purchased two assets this year.

The cost of first purchase = $874,000

The cost of second purchase = $660,000

Both assets has a recovery of = 7 years

So, How many months of Depreciation of MACRS is Durna permits for each assets thus year.

Now,

Durna is permitted for  10.5 months depreciation for the machine and a 1.5 months depreciation for the equipment.

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