{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

depreciation_contributed_property_solution

# depreciation_contributed_property_solution - Solution...

This preview shows pages 1–2. Sign up to view the full content.

Solution : Depreciation of contributed property Denny was a sole proprietor on May 12, 2008, when he bought used equipment (7-year property) for \$1,000 to use in his business. In 2008 and 2009, he used MACRS to depreciate the equipment. Tax year Cost MACRS % Cost recovery 2008 1,000 14.29% 143 2009 1,000 24.49% 245 2010 17.49% 2011 12.49% 2012 8.93% 2013 8.92% 2014 8.93% 2015 4.46% 100.00% 388 On December 31, 2009, the asset had an adjusted basis of \$612 (\$1,000 – \$388) and a fair value of \$800. Required : Compute 2010 cost recovery in each of the independent cases. 1. On January 1, 2010, he transferred the equipment to the ABC partnership in exchange for a 50% interest in the partnership. Form 1065: \$1,000 x 17.49% (MACRS, year 3) = \$175 2. On March 1, 2010, he transferred the equipment to the ABC partnership in exchange for a 50% interest in the partnership. \$1,000 x 17.49% (MACRS, year 3) = \$175 Schedule C: \$175 x 2/12 = \$29 Form 1065: \$175 x 10/12 = \$146 3. On January 1, 2010, he transferred the equipment to the ABC corporation in exchange for a 50% ownership interest in a Sec. 351 tax-free exchange. Form 1120: \$1,000 x 17.49% (MACRS, year 3) = \$175

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}