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22 September, 11:32

Tan Company acquires a new machine (ten-year property) on January 15, 2017, at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2017, at a cost of $40,000. No election is made to use the straight-line method. The company does not make the § 179 election and elects to not take additional first-year depreciation. Determine the total deductions in calculating taxable income related to the machines for 2017.

a. $24,000

b. $25,716

c. $102,000

d. $132,858

e. None of the above

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  1. 22 September, 12:37
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    b. $25,716

    Explanation:

    The total cost recovery Deduction is:

    10-year property

    MACRS cost recovery ($200,000*0.10) $20,000

    7-year property

    MACRS cost recovery ($40,000*0.1429) $5,716

    Total cost recovery $25,716

    Therefore, The total deductions in calculating taxable income related to the machines for 2017 is $25,716.
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