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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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b. 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
Accumulated Depreciation
Adjusted basis and gain/loss on the sale
Sale Price
Adjusted Basis
Accumulated Depreciation
Gain/Loss on sale
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