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:

Judge

An official appointed to decide cases in a court of law.

Inconsistency

The quality of being inconsistent, lacking uniformity, or showing variation in actions, values, or outcomes.

Inseparability

A characteristic of services indicating that they are produced and consumed at the same time, making the separation of production and consumption impossible.

Innovation

The act of introducing something new or significantly improved, such as a product, service, process, or method, enhancing its value or functionality.