Question: Assume a 40% tax rate. The asset was purchased 2 years ago for $198,000 and is
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Question:
Assume a 40% tax rate.
The asset was purchased 2 years ago for $198,000 and is being depreciated under MACRS using a 5-year recovery period.
| Recovery year | 3 years | 5 years | 7 years | 10 years |
| 1 | 33% | 20% | 14% | 10% |
| 2 | 45% | 32% | 25% | 18% |
| 3 | 15% | 19% | 18% | 14% |
| 4 | 7% | 12% | 12% | 12% |
| 5 | 12% | 9% | 9% | |
| 6 | 5% | 9% | 8% | |
| 7 | 9% | 7% | ||
| 8 | 4% | 6% | ||
| 9 | 6% | |||
| 10 | 6% | |||
| 11 | 4% | |||
| Totals | 100% | 100% | 100% | 100% |
Required:
Calculate the firm's tax liability for each case.
a. The asset is sold for $217,800.
b. The asset is sold for $148,500.
c. The asset is sold for $95,040.
d. The asset is sold for $76,000.
Expert Answer:
Depreciation of asset in two years 2032 52 of 198000 102960 Depreciated value 198000 102960 95040 a ... View the full answer
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