Question

You own some equipment that you purchased 3 years ago at a cost of $350,000. The equipment is 5-year property for MACRS. You are considering selling the equipment today for $123,000. Which one of the following statements is correct if your tax rate is (40%? initial : 350,000 MACRS 5-year property Year Rate 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% 0 straight line 350,000 - 123,000 w @ a. The tax due on the sale is $26,425 b. The book value today is $0 C. The accumulated depreciation to date is $329,840 d. The taxable amount at the sale is $22,200 e. The aftertax salvage value is $73,800 = 75,666.7 BV = 350,000-6175 (3) After taxi 123,000 - 0.4(1231

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Answer 1

Solution: Option dis corre ct. Explanation cost Less Accumulated dep 350000* (0.2+0.32+0.192) Book value today sale value Gain on sale (i.e taxable amount at the sale) Tax on gain After tax sale value 350000 249200 hence option c is incorrect 100800 hence option b is incorrect 123000 22200 hence option dis correct 8880 hence option a is incorrect 114120 hence option e is incorrect.