On May 26, 2007, Jamal purchased machinery for $30,000 to be used in his business. He did not elect to expense the equipment under §179 or the bonus. On October 10, 2011, he sells the machinery to a scrap metal dealer. What is his cost recovery deduction for 2011 rounded to the nearest dollar?



A. $0


B. $1,340


C. $2,679

is it C

To calculate the cost recovery deduction for 2011, we need to determine the depreciable basis and the depreciation method used by Jamal.

1. Depreciable Basis:
The depreciable basis is the original cost of the machinery minus any deductions or credits taken for the equipment. In this case, Jamal did not elect to expense the equipment under §179 or take advantage of bonus depreciation. Therefore, the depreciable basis is the full original cost of $30,000.

2. Depreciation Method:
To determine the depreciation method used, we need to know the class life of the machinery. Each category of assets has a designated recovery period or class life under the Modified Accelerated Cost Recovery System (MACRS), which is used to calculate depreciation deductions.

Since this information is not given in the prompt, we cannot determine the depreciation method directly. However, assuming the machinery has a recovery period of 7 years, the most common class for machinery, we can proceed with the calculation.

Using the 7-year MACRS depreciation method, the deduction for 2011 is typically calculated using the half-year convention. This means that only half of the annual depreciation amount is claimed in the year of acquisition and the year of disposition.

3. Calculation:
For 7-year MACRS depreciation, the annual depreciation rate is 14.29% (100% divided by 7 years). As we are using the half-year convention, the deduction for 2011 would be half of the annual depreciation amount.

Deduction for 2011 = (Depreciable Basis × Annual Depreciation Rate) / 2

Deduction for 2011 = ($30,000 × 14.29%) / 2
Deduction for 2011 ≈ $2,147

Rounded to the nearest dollar, the cost recovery deduction for 2011 is $2,147.

Therefore, the correct answer is not provided as an option in the given choices.