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

question 26

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 gain is reported by Parent Corporation in the first year that Subsidiary Corporation depreciates the machine?

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Definitions:

Field Size

A property that defines the maximum amount of data that a field can hold in a database, such as the number of characters in a text field.

Short Text

A data type in databases designated for fields that contain letters, numbers, and characters, typically limited in length to a specified number of characters.

Field Size

The allocated space or number of characters allowed in a database field, determining the maximum amount of data it can hold.

Decimal Places

Refers to the number of digits shown to the right of the decimal point in numerical values, affecting how precisely numbers are represented.