Tom Acquired a Used Five-Year Class Asset on November 5

question 56

Essay

Tom acquired a used five-year class asset on November 5, 2012 for $20,000. This was the only asset Tom acquired in 2012. He placed the asset in service on January 20, 2013. However, because the asset was purchased in 2012, Tom deducted regular MACRS cost recovery on the asset for the year 2012.He did not elect to expense any of the asset under § 179. In 2013, Tom purchased no assets and because he had no taxable income, he did not deduct any cost recovery. In 2014, Tom sold the five-year asset on September 25th. Determine the basis of the five-year asset at the time of the sale.

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Definitions:

Accelerating Cash Collection

Strategies or practices implemented by a business to decrease the amount of time between selling a product or service and receiving payment for it.

Discounting

The process of determining the present value of a future amount of money or a series of future cash flows, by applying a discount rate.

Net Realizable Value

The estimated selling price of goods or assets in the course of normal business, minus any costs associated with the sale or completion.

Gross Receivables

The total amount of money owed to a company by its customers before deducting any allowance for doubtful accounts.