Concepts in Federal Taxation 2019 (with Intuit ProConnect Tax Online 2017 and RIA Checkpoint 1 term (6 months) Printed Access Card)
26th Edition
ISBN: 9781337702621
Author: Kevin E. Murphy, Mark Higgins
Publisher: Cengage Learning
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Chapter 10, Problem 26P
a.
To determine
State Incorporation T’s maximum Section 179 deduction during 2018.
b.
To determine
State the
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1. During the year ended December 31, 2021, management of
Alpha Corporation (the Company) decided to sell a piece of
its idle equipment. The equipment had an original tax cost
of $75,000 and as of December 31, 2020, tax depreciation
of $75,000 had been taken on the equipment. The
equipment was sold to an unrelated party for $95,000 cash
on June 15, 2021. For the purpose of requirement 3, assume
that the book cost and book depreciation have been the
same as the tax cost and tax depreciation.
Required:
1. Calculate the tax gain on sale of the equipment.
2. Calculate the portion of the gain that is depreciation
recapture.
3. Prepare the journal entry to record sale of the equipment.
II.
MACRS COMPUTATIONS. Compute the allowable MACRS deduction under each of the following
independent situations. Show computations for partial credit.
In 2021, Early Company made its only purchase of equipment on October 18. The equipment was used
property, costing $1,000,000. Assuming the equipment is in the 5-year recovery class, answer the following
1.
questions.
a. Can Early Co. elect to use bonus depreciation for the equipment?
b. If Early cannot or does not wish to use bonus depreciation for the equipment, what depreciation conventic
(table) does Early use for the equipment?
Tafty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent.
Required: SHOW YOUR WORKINGS
Determine whether the depreciation of the equipment will lead to a deferred tax asset, or a deferred tax liability?
2. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2022?
Chapter 10 Solutions
Concepts in Federal Taxation 2019 (with Intuit ProConnect Tax Online 2017 and RIA Checkpoint 1 term (6 months) Printed Access Card)
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- PJ Limited purchased a machinery for $50,000 for its operations on 1 October 2015 and have been using it for income producing activities. In the current financial year (2019-2020), the machinery broke down and it was replaced with another machinery with the cost of $70,000 which could improve(?) the production, a feature that was not available in previous machinery. Explain in detail using relevant tax laws and cases whether this amount of $70,000 is deductible for MJ limited.Explain in detail about the deductible part of the scenario. Presenting the types of deductibles ;general and specific and using relevent laws and cases. Kindly use the four sections of: Facts of the scenario Relevant laws and cases Application of laws and cases Conclusionarrow_forward1. During 2018, Axel Corporation purchases machinery (5-year property) for $120,000 and decides not to take a Section 179 deduction. a. Compute maximum tax depreciation for the machinery for 2018-2023. b. Compute maximum tax depreciation for 2018-2023 if Axel does not take Sec. 179 deduction and elects out of 100% bonus. 2. During 2018, Diamonds Inc. purchases only one asset: equipment (7-year property) for $1,600,000. Diamonds had taxable income of $750,000 in 2018 and takes the maximum Section 179 deduction and elects out of 100% bonus. Compute maximum tax depreciation for 2018-2025.arrow_forwardRenata Corporation purchased equipment in 2019 for $180,000 and has taken $83,000 of regular MACRS depreciation. Renata Corporation sells the equipment in 2021 for $110,000. What is the amount and character of Renata's gain or loss? Renata Corporation has a gain of $ of which $ is treated as ordinary income due toarrow_forward
- afty Ltd purchased an equipment on 1 July 2019 for $500 000, and its useful life to be five years, with no residual value. Assume that the only temporary difference for tax-effect accounting purposes relates to the depreciation of the newly acquired equipment. For tax purposes it can be fully depreciated over two years. The tax rate is assumed to be 30 per cent. Required: SHOW YOUR WORKINGS 1. What would be the balance of the deferred tax asset or deferred tax liability as at 30 June 2022?arrow_forwardMJ Limited purchased a machinery for $50,000 for its operations on 1 October 2015 and have been using it for income producing activities. In the current financial year (2019-2020), the machinery broke down and it was replaced with another machinery with the cost of $70,000 which could improve(?) the production, a feature that was not available in previous machinery. Explain in detail using relevant tax laws and cases whether this amount of $70,000 is deductible for MJ limited. Kindly use the four sections of: Facts of the scenario Relevant laws and cases Application of laws and cases Conclusionarrow_forwardPotomac LLC purchased an automobile for $65,000 on August 5, 2019. What is Potomac's depreciation expense for 2019 (recognizing that Potomac does not elect any bonus depreciation)? Exhibit 10-10 on page 10-26. The text does not reflect year 2020 limits, so this problem will use Year 2019 limits, to avoid confusion.arrow_forward
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