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

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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?


Definitions:

Difference

The result of subtracting one quantity from another, often used to compare or measure changes.

Significant Correlation

A relationship between two variables where changes in one variable are associated with changes in the other, and this association is statistically significant.

Pearson Correlation

A measure of the linear correlation between two variables X and Y, giving a value between -1 and 1.

Variance

A measure of variability that describes the spread of a data set by taking the average of the squared differences from the mean.

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