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An asset was purchased three years ago for $140,000. Compute the tax loss on the sale and the related tax benefit if the asset is sold now for $15,320.

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An asset was purchased three years ago for $140,000. It falls into the five-year category for MACRS depreciation. The firm is in a 35 percent tax bracket. Compute the:

a. Tax loss on the sale and the related tax benefit if the asset is sold now for $15,320.

b. Gain and related tax on the sale if the asset is sold now for $58,820.

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The MACRS 5-year recovery period class has the following depreciation rates.
Year Depr. Rate(%)
1 20%
2 32
3 19.2
4 11.52
5 11.52
6 5.76
Then at the end of three ...

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