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Tom purchases a new manufacturing machine for his business on April 1, 2015 for $27,000. The machine is depreciated under MACRS with a 7-year recovery period. This maachine was his only asset acquisition of this year. Thomas elects to expense $25,000 of the cost under Section 179.
a. What is Tom’s total deprciation deduction for the machine in 2015.
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Order Paper Nowb. Tom decides to sell his machine on October 5, 2017 for $10,000. Compute Tom’s depreciation deduction for 2015 through 2017. The adjusted basis of the machine on October 5, 2017, and the gain or loss on the sale. (HINT: 2017 is only 1/2 year).
Refer to the table on the right to calculate the MACRS depreciation
| MACRS Percentage Rates | |||
| Recovery Period | |||
| Recovery Year | 3- Year | 5-Year | 7-Year |
| 1 | 33.33 | 20.00 | 14.29 |
| 2 | 44.45 | 32.00 | 24.49 |
| 3 | 14.81 | 19.20 | 17.49 |
| 4 | 7.41 | 11.52 | 12.49 |
| 5 | – | 11.52 | 8.93 |
| 6 | – | 5.73 | 8.92 |
| 7 | – | – | 8.93 |
| 8 | – | – | 4.46 |
| a. | Sec. 179 Expense | ||||||
| MACRS Depreciation | |||||||
| 2015 Total | |||||||
| b. | 2015 | ||||||
| 2016 | |||||||
| 2017 | |||||||
| Accumulated Depreciation | |||||||
| Adjusted basis and gain/loss on the sale | |||||||
| Sale Price | |||||||
| Adjusted Basis | |||||||
| Cost | |||||||
| Accumulated Depreciation | |||||||
| Gain/Loss on sale | |||||||
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