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:

Federal Income Tax

The tax levied by the United States federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Interest Calculations

The process of determining the amount of interest owed or earned over a specified period of time, based on a given rate and principal amount.

Merchandise

Goods available for sale in a retail or wholesale environment.

Journalize

The act of recording transactions in an accounting journal in chronological order.