18. The recently enacted tax law allows companies to use immediate write of equi
ID: 2338345 • Letter: 1
Question
18. The recently enacted tax law allows companies to use immediate write of equipment purchases. Assume that the five years are over and the tax law has reverted to the MACRS system discussed in chapter 8 (which is the way the law is written). So, six years from now. you place the following equipment into service in the following years with the following tax lives: Year placed Tax life Cost Into service Computer 2025 3 year $48,000 Car 2026 5 year $65,000 Shelves 2027 7 year $98,000 What is the total depreciation expense allowed by the IRS for all three pieces of equipment for tax years 2028?__________________ What is the total depreciation expense allowed by the IRS for all three pieces of equipment for tax years 2029?__________________ What is the total depreciation expense allowed by the IRS for all three pieces of equipment for tax years 2030?__________________
Explanation / Answer
Year
Computer (Purchase)
Depreciation
Car
Depreciation
Shelves
Depreciation
Total depreciation
2025
$48000
3 year life
= 33.33%*48000
= 15998
15998
2026
= 44.45%*48000
= 21336
$65000
5 year life
= 20%*65000
= 13000
34336
2027
=14.81%*48000
= 7109
= 32%*65000
= 20800
$98000
7 year
= 14.29%*98000= 14004
41913
2028
= 7.41%*48000
= 3557
= 19.20%*65000
= 12480
= 24.49%*98000
= 24000
40037
2029
= 11.52*65000
= 7488
= 17.49%*98000
= 7340
14828
2030
= 11.52*65000
= 7488
= 12.49%*98000
= 1224
8712
Total depreciation for 2028= $40037
Total depreciation for 2029= $14828
Total depreciation for 2030= $8712
Year
Computer (Purchase)
Depreciation
Car
Depreciation
Shelves
Depreciation
Total depreciation
2025
$48000
3 year life
= 33.33%*48000
= 15998
15998
2026
= 44.45%*48000
= 21336
$65000
5 year life
= 20%*65000
= 13000
34336
2027
=14.81%*48000
= 7109
= 32%*65000
= 20800
$98000
7 year
= 14.29%*98000= 14004
41913
2028
= 7.41%*48000
= 3557
= 19.20%*65000
= 12480
= 24.49%*98000
= 24000
40037
2029
= 11.52*65000
= 7488
= 17.49%*98000
= 7340
14828
2030
= 11.52*65000
= 7488
= 12.49%*98000
= 1224
8712
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