Respuesta :
A. Stella’s cost recovery deduction for 2021 is $10,629.
B. Stella’s cost recovery deduction for 2025 is $22,213.
What is cost recovery?
The process of recovering the cost of any expense is known as cost recovery, often known as the cost recovery method. The cost recovery approach accounts for the fact that recovering costs doesn't always occur immediately or even within the same year when it comes to closing the books. The cost recovery approach allows you to determine your income while taking into account any cost that hasn't yet been recouped. In essence, a transaction or expenditure will not be recorded in your company's accounts until it has been entirely reimbursed. A company that uses the cost recovery approach will promptly count the revenue and cost of sales for any given transaction.
Calculation:
Total Value of Asset = 2,100,000
Cost of land = 400,000
Net Cost of Building = 1,700,000
Depreciable value of Building (A) = 1,700,000
Useful life as per US Tax Act (B) = 39
Depreciation Amount (C=A/B) = 43,590
Computation of Deduction for the Year 2021
Purchase date = 03-10-21
End date = 31-12-21
Days in use (D) = 89.00
Deduction Amount = 10,629
Computation of Deduction for the Year 2025
Sale date = 05-07-25
End date = 31-12-24
Days in use (E) = 186.00
Deduction Amount = 22,213
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