Parent Corporation Purchases a Machine (A Five-Year Property)for $20,000

question 52

Essay

Parent Corporation purchases a machine (a five-year property)for $20,000. It claims $4,000 of depreciation under the MACRS rules in the first year it owns the property. At the close of business on the last day of the first year, Parent sells the machine to a 100%-owned corporation (Subsidiary)for $18,000. Subsidiary immediately commences depreciating the machine as a five-year property using the regular MACRS rules. What depreciation can be claimed by Subsidiary Corporation in the first year it uses the machine?

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Definitions:

Steroid Hormones

Hormones, such as insect molting hormone, cortisol, and male/female sex hormones, that are derived from cholesterol.

Thyroid Hormones

Hormones, including thyroxin (T4) and triiodothyronine (T3), secreted by the thyroid gland; stimulate rate of metabolism.

Surface Receptors

Proteins located on the cell membrane that bind to specific molecules in the cell's external environment, initiating a cellular response.

Second Messengers

Intracellular signaling molecules released by a cell in response to exposure to extracellular signaling molecules, amplifying the signal within the target cell.