On July 9, 2008, Tom Purchased a Computer (Five-Year Property

question 20

Essay

On July 9, 2008, Tom purchased a computer (five-year property for MACRS purposes)for $6,000, which he used in his sole proprietorship. He claimed $1,200 (0.20 × $6,000)of depreciation for 2008. On February 9, 2009, he transfers the computer and other assets of his sole proprietorship to Brewer Corporation in exchange for Brewer stock in a transfer qualifying under Sec. 351. What is the amount of depreciation for 2008 claimed by Tom? What is the amount of depreciation for 2009 claimed by Brewer Corporation? What is Brewer's basis in the computer on the date of transfer?

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Definitions:

Negative Lead

An electrical connection that serves as the return path for current in a circuit, often marked with a minus (-) symbol or black color in electronics.

DMM

Digital Multimeter, an electronic measuring instrument that combines multiple measurement functions in one unit, such as voltage, current, and resistance.

Voltage Measurement

The process of determining the electrical potential difference between two points in an electric circuit.