Which asset is most likely to qualify for depreciation for tax purposes?

Which asset is most likely to qualify for depreciation for tax purposes?

• A. Land
• B. Livestock purchased for breeding or dairy purposes
• C. Cash
• D. Accounts receivable

Answer: (B)

Depreciation for tax purposes applies to tangibl e property used in a business that has a limited life. Land doesn’t wear out or get used up over time, so it isn’t depreciable. Financial assets like cash or accounts receivable aren’t depreciable either—they’re money and claims, not physical assets that wear out with use. Livestock purchased for breeding or dairy has a finite productive life and is used directly in farming operations, so it fits the rule for depreciation. Spreading its cost over the years it contributes to income reflects the asset’s aging and ongoing value in production.

Depreciation for tax purposes applies to tangibl e property used in a business that has a limited life. Land doesn’t wear out or get used up over time, so it isn’t depreciable. Financial assets like cash or accounts receivable aren’t depreciable either—they’re money and claims, not physical assets that wear out with use. Livestock purchased for breeding or dairy has a finite productive life and is used directly in farming operations, so it fits the rule for depreciation. Spreading its cost over the years it contributes to income reflects the asset’s aging and ongoing value in production.