The tax law provides four methods of cost recovery for assets:
(1) Immediate deduction of the total cost when paid or incurred;
(2) Deferral of cost until the property is sold or otherwise disposed of;
(3) Deduction based on a percentage of income from the property over its life; and
(4) Deduction over a period of years, beginning at date of acquisition, using a consistent method.
Discuss each cost recovery method. Provide examples of each and explain the reasoning underlying each method.