Personal Property Example: Straight-Line Alternate ACRS

A company purchased a drill press in August 1983 for $20,000. Since the recovery period for the drill press under regular ACRS table depreciation would be 5 years, the company has the option of selecting a recovery period of 5, 12, or 25 years.

Although the property was placed in service in August, the half-year convention applies under ACRS rules. Cost recovery of an asset with an elected 5-year life is therefore taken over 6 years.

Basis	= $20,000
Recovery period	= 5 years
Rate	= 1/5
Cost recovery for 1983
1/5 x$20,0000 x 1/2	= $2,000
Cost recovery for 1984
1/5 x $20,000	= $4,000
Cost recovery for 1985
1/5 x $20,000	= $4,000
Cost recovery for 1986
1/5 x $20,000	= $4,000
Cost recovery for 1987
1/5 x $20,000	= $4,000
Cost recovery for 1988
1/5 x $20,000 x 1/2	= $2,000