Three years ago, ABC Company purchased some five year MACRS property for $74,000. Today it is...

Three years ago, ABC Company purchased some five year MACRS property for $74,000. Today it is selling it for $28,500. How much tax will the company owe on this sale if the tax rate is 21 percent?

The MACRS percentages are as follows, commencing with Year 1: 20.00, 32.00, 19.20, 11.52, 11.52, and 5.76 percent.

A. -$3,431.17

B. -$6,389.44

C. $0.00

D. $1,509.48

E. $2,965.50

Expert Solution

D. $1,509.48

Tax on Sale	=	(Sales Price - Book Value)*Tax Rate
		=	(28500-21312)*21%
		=	$ 1,509.48

Working:

Book Value at year end 3:

Year	Cost	Depreciation %	Depreciation	Accumulated Depreciation	Book Value at year end
1	$ 74,000	20.00%	$ 14,800	$ 14,800	$ 59,200
2	$ 74,000	32.00%	$ 23,680	$ 38,480	$ 35,520
3	$ 74,000	19.20%	$ 14,208	$ 52,688	$ 21,312

jeff jeffy answered 1 year ago

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