determine the amount of capital gain or loss Mr. Mann incurred through this tran
ID: 2373135 • Letter: D
Question
determine the amount of capital gain or loss Mr. Mann incurred through this transaction...
In July of 2009, Mr. Mann, a sole proprietor who performs excavating services, purchased and put to use for business a piece of heavy equipment for $36,500. This piece of equipment was depreciated using the MACRS 150% DB method of depreciation over the useful period of 7 years. No salvage value was approximated and applied to the appreciable basis of this equipment. Freight and installation charges for this equipment totaled $1500. Mr. Mann sold this piece of equipment for $31,500 in June of 2011.
Explanation / Answer
Depreciation rate= 1/7*150% 21.43 Year 1 half year as purcahased in July 10.71 % Cost of Equipment 36500+1500 $38,000 Year Beginning book value A Dep rate Dep B Acc dep Ending book value A-B Dec 31 2009 38000 10.71% 4070 4070 33930 Dec-10 33930 21.43% 7271 11341 26659 Jun-11 26659 10.71% 2855 14196 23804 Capital gain on sale of equipment Sales price $31,500 Less: Book value 23804 Capital gain $7,696 If rates ar not rounded off to two decimal than answer is Year Beginning book value A Dep rate Dep B Acc dep Ending book value A-B Dec 31 2009 38000 10.714% 4071 4071 33929 Dec-10 33929 21.429% 7270 11342 26658 Jun-11 26658 10.714% 2856 14198 23802 Capital gain on sale of equipment Sales price $31,500 Less: Book value 23802 Capital gain $7,698
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