The tax loss on the sale and the related tax benefit. Introduction: Tax loss: It is the loss incurred when the total deduction claimed in a financial year exceeds the total assessable income of the year. Tax benefit: It is the allowable deductions on the assessable income of the taxpayer, with an intent to reduce the tax liability and burden of the taxpayer. MACRS depreciation method: MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

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Answer 1

Question

Chapter 12, Problem 31P

a.

Summary Introduction

To calculate: The tax loss on the sale and the related tax benefit.

Introduction:

Tax loss:

It is the loss incurred when the total deduction claimed in a financial year exceeds the total assessable income of the year.

Tax benefit:

It is the allowable deductions on the assessable income of the taxpayer, with an intent to reduce the tax liability and burden of the taxpayer.

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

b.

Summary Introduction

To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

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Assume the following: . A firm acquires an asset for $120.000 with a 5 year useful life and no salvage . The asset will generate $50,000 of cash flow for all five years . The tax rate is 20% . The firm will depreciate the asset over four years on a straight-line (SL) basis for tax purposes and over five years on a SL basis for financial reporting purposes. Taxable income in year 1 is: $26.000 $20.000 © $4.000

A firm purchased $62,800 of fixed assets two years ago. The company no longer needs these assets so it is going to sell them today for $28,500. The assets are classified as five-year property for MACRS. The MACRS rates are .2, .32, .192, .1152, .1152, .0576, for Years 1 to 6, respectively. What is the net cash flow from this sale if the firm's tax rate is 23 percent and no bonus depreciation is taken? $29,281.04 $26,576.00 $28.878.12 $27,516.60 O $29,648.12

Watanabe Corporation is selling one of its assets for $1,700. The asset originally cost $10,000. It has been depreciated under MACRS using a five-year recovery period, and it has been depreciated for four full years. Assume that the tax rate is 40 percent on both ordinary income and capital gains. What are the tax effects of this transaction? Jellibean Corporation will replace one of its existing assets with a newer type. The existing asset was purchased two years ago at a cost of $30,000 and was being depreciated under MACRS using a five-year recovery period. This existing asset can be sold for $25,000. The new asset that they plan to buy will cost $75,000 and will also be depreciated under MACRS using a five-year recovery period. If the assumed tax rate is 40 percent on both ordinary income and capital gains, the initial investment will be equal to what amount after adjusting for taxes? Calculate the initial purchase price for an asset that has a book value of $34,800 and has…

Answer 2

Question

Chapter 12, Problem 31P

a.

Summary Introduction

To calculate: The tax loss on the sale and the related tax benefit.

Introduction:

Tax loss:

It is the loss incurred when the total deduction claimed in a financial year exceeds the total assessable income of the year.

Tax benefit:

It is the allowable deductions on the assessable income of the taxpayer, with an intent to reduce the tax liability and burden of the taxpayer.

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

b.

Summary Introduction

To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

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Answer 3

Question

Chapter 12, Problem 31P

a.

Summary Introduction

To calculate: The tax loss on the sale and the related tax benefit.

Introduction:

Tax loss:

It is the loss incurred when the total deduction claimed in a financial year exceeds the total assessable income of the year.

Tax benefit:

It is the allowable deductions on the assessable income of the taxpayer, with an intent to reduce the tax liability and burden of the taxpayer.

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

b.

Summary Introduction

To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

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Answer 4

Question

Chapter 12, Problem 31P

a.

Summary Introduction

To calculate: The tax loss on the sale and the related tax benefit.

Introduction:

Tax loss:

It is the loss incurred when the total deduction claimed in a financial year exceeds the total assessable income of the year.

Tax benefit:

It is the allowable deductions on the assessable income of the taxpayer, with an intent to reduce the tax liability and burden of the taxpayer.

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

b.

Summary Introduction

To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

Expert Solution & Answer

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Answer 5

Chapter 12, Problem 31P

a.

Summary Introduction

To calculate: The tax loss on the sale and the related tax benefit.

Introduction:

Tax loss:

It is the loss incurred when the total deduction claimed in a financial year exceeds the total assessable income of the year.

Tax benefit:

It is the allowable deductions on the assessable income of the taxpayer, with an intent to reduce the tax liability and burden of the taxpayer.

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

b.

Summary Introduction

To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

Answer 6

Chapter 12, Problem 31P

a.

Summary Introduction

To calculate: The tax loss on the sale and the related tax benefit.

Introduction:

Tax loss:

It is the loss incurred when the total deduction claimed in a financial year exceeds the total assessable income of the year.

Tax benefit:

It is the allowable deductions on the assessable income of the taxpayer, with an intent to reduce the tax liability and burden of the taxpayer.

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Answer 7

Chapter 12, Problem 31P

a.

Summary Introduction

To calculate: The tax loss on the sale and the related tax benefit.

Introduction:

Tax loss:

It is the loss incurred when the total deduction claimed in a financial year exceeds the total assessable income of the year.

Tax benefit:

It is the allowable deductions on the assessable income of the taxpayer, with an intent to reduce the tax liability and burden of the taxpayer.

MACRS depreciation method:

MACRS stands for modified accelerated cost recovery system, which is a tool of depreciation used in the U.S. for tax purposes. This system places all the assets into categories with pre-specified depreciation periods.

Answer 8

b.

Summary Introduction

To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

Answer 9

b.

Summary Introduction

To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

Answer 10

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Answer 11

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Answer 12

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Answer 13

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Solution Summary: The author explains the calculation of the tax loss on the sale and the related tax benefit.

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To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

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Chapter 12 Solutions

Solution Summary: The author explains the calculation of the tax loss on the sale and the related tax benefit.

Concept explainers

Videos

To calculate: The gain and related tax on the sale of asset. Introduction: Tax liability: An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.

Want to see the full answer?

Chapter 12 Solutions

To calculate: The gain and related tax on the sale of asset.

Introduction:

Tax liability:

An amount of tax that is owed by a company or an individual to the taxing authority is termed as tax liability.