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

question 20

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?

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Definitions:

Ash Blanketing

The covering of large areas with volcanic ash following an explosive volcanic eruption.

Pumice

Volcanic rock, especially of felsic or intermediate composition, containing many vesicles (holes) formed by expanding gases in magma.

Lava

Molten rock that has been expelled from a volcano during an eruption and solidifies as it cools on the Earth's surface.

Ash

Fine particles of rock, minerals, and volcanic glass created during volcanic eruptions and carried through the air.