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:

Major Organic Product

During chemical interactions with organic compounds, it's the principal product yielded in the largest quantity.

Reaction

The act of substances merging to form new ones, each with its own differing features.

Organic Chemistry

A field of chemistry focused on analyzing the formation, characteristics, make-up, responses, and creation of compounds that include carbon.

N-butanol

An alcohol with a four-carbon chain, commonly used as a solvent and in the synthesis of various organic compounds.