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Nicki Corporation (a calendar year corporation) purchased a new machine (7 year property) in July 2015...

Nicki Corporation (a calendar year corporation) purchased a new machine (7 year property) in July 2015 for $20,000. Nicko did not elect section 179 for this asset but did claim 50% bonus depreciation. In November 2018, Nicko sells the machine. What is the machines adjusted basis at the date of sale?

Solutions

Expert Solution

Yearly rate of depreciation = 100%/7 years = 14.28%
Monthly rate of depreciation = 100%/(7 years x 12 months) = 1.19%
Calculation of machine adjusted basis at the date of sale
Particular Amount($)
Machine value (A) 20,000
Less: Depreciation
          Bonus Depreciation @ 50% of 20,000 10,000
          Normal Depreciation:
          for 2015 for 6 months @ 1.19% per month on 10,000 714
          For 2016 for 1 full year @ 1.19% pm or 14.28% /year 1428
          For 2017 for 1 full year @ 1.19% pm or 14.28% /year 1428
          For 2018 for 10 month @ 1.19% per month 1190
Total Depreciation (B) 14,760
Adjusted basis of the machine at the date of sale (A-B) 5,240

ekkarill92 answered 1 year ago
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