Fall 2020 3. New Mexico Tech purchased an office furniture (7-year MACRS property) at a cost of $2,000. 3.1 Develop the MACRS percentage rates ($r_t$) for the asset with a cost basis of $100. Note the switch from DDB to SL can be done in Year 5. Year 1 2 3 4 5 6 7 8 Calculation MACRS percentage rate ($r_t$) 3.2 The furniture was sold after 5 years for $700. Determine the depreciation recapture on this asset. 3.3 Now assume that the furniture was sold after 5 years for $2,500. Determine the capital gain on this asset.
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1 To calculate the MACRS percentage rates, we need to determine the depreciation method used for each year. The MACRS depreciation method switches from Double Declining Balance (DDB) to Straight Line (SL) in Year 5. Year 1: DDB (200% of straight-line rate) Year 2: Show more…
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