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:

Ischium Bone

One of the three bones that make up the pelvis, supporting weight while sitting and connecting with the lower limb.

Fractured

Refers to a break, rupture, or crack in a bone, often caused by injury, stress, or disease.

Pelvis

Any basin-shaped structure; cup-shaped ring of bone at the lower end of the trunk, formed from the ossa coxal bones, sacrum, and coccyx.

Greater Sciatic Notch

A notable depression in the ilium bone of the pelvis through which the sciatic nerve passes, significant for leg movement and sensation.