Hannibal owns a farm. He purchases a tractor in 2007 at a cost of $25,000. Because 2007
Question:
Because 2007 is a bad year, he does not deduct any depreciation on the tractor in 2007. He sells the tractor in 2011 for $16,000. He takes straight-line depreciation on the tractor of $12,500 for the years 2008 to 2011. The total allowable straight-line depreciation for the tractor for 2007 to 2011 is $15,000. What is Hannibal's gain or loss on the sale of the tractor? Explain.
Step by Step Answer:
The basis of depreciable property must be reduced by the greater of the ...View the full answer
Concepts In Federal Taxation
ISBN: 9780324379556
19th Edition
Authors: Kevin E. Murphy, Mark Higgins, Tonya K. Flesher
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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