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 Year||3- Year||5-Year||7-Year|
|a.||Sec. 179 Expense|
|Adjusted basis and gain/loss on the sale|
|Gain/Loss on sale|