Refer to the facts in Problem 43 and assume the property purchased is nonresidential rental property. Compute MACRS depreciation on the property for 2018 and 2019 , assuming the property is not qualified leasehold improvement, retail improvement or restaurant property.

 Problem 43

Assume the same facts as in Problem 45.

Further assume that next year, Gary sells the SUV for \(\$ 20,000\).

a. How much depreciation expense can Gary deduct as a business deduction with respect to the SUV on next year's tax return?

b. How much gain or loss will Gary recognize for tax purposes in connection with the sale of the vehicle next year?

Problem 45 At the beginning of the year, NRD Company purchased the rights to a natural resource for \(\$ 10,000,000\). The estimated recoverable units from the natural resource amount to \(3,500,000\) units. During the year, NRD sold \(1,000,000\) units of the natural resource for \(\$ 10\) per unit and incurred operating costs other than depletion of \(\$ 5\) per unit. Based on these facts:

a. Compute NRD's depletion deduction using the cost depletion method.

b. Compute the company's depletion deduction using the percentage depletion method. Assume a 15 percent specified depletion percentage.

c. Which depletion deduction, cost or percentage, will NRD use this year?