Question

Nicko Corporation (a calendar-year corporation) purchased a new machine (7-year property) in July 2015 for $20,000. Nicko did not elect Section 179 for this asset but did claim 50 percent bonus depreciation. In November 2018, Nicko sells the machine. What is the machine’s adjusted basis at the date of sale?

Answer 1

Solution:
Yearly rate of depreciation = 100%/7 years = 14.28%
Monthly rate of depreciation = 100%/(7 years x 12 months) = 1.19%
Calculation of machine adjusted basis at the date of sale
Particular	Amount($)
Machine value (A)	20,000
Less: Depreciation
Bonus Depreciation @ 50% of 20,000	10,000
Normal Depreciation:
for 2015 for 6 months @ 1.19% per month on 10,000	714
For 2016 for 1 full year @ 1.19% pm or 14.28% /year	1428
For 2017 for 1 full year @ 1.19% pm or 14.28% /year	1428
For 2018 for 10 month @ 1.19% per month	1190
Total Depreciation (B)	14,760
Adjusted basis of the machine at the date of sale (A-B)	5,240