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Depreciation using MACRS

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BC Corporation is not having a good year. Sally and Ed are expecting the company to absorb a $40,000 loss. As a result, they have decided to depreciate $130,000 of equipment using the straight-line method for their books and using the 200% MACRS for tax purposes. Therefore, depreciation for the equipment will show up as $17,000 on their books and as $26,000 for tax. They want to know what tax benefits, if any, BC Corporation will realize because of their changes.

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Solution Summary

This solution defines the Modified Accelerate Cost Recovery System (MACRS) and how it affects depreciation of an asset and the taxes associated. It also calculates the tax benefits the BC Corporation will realize in Sally and Ed's case.

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BC Corporation is not having a good year. Sally and Ed are expecting the company to absorb a $40,000 loss. As a result, they have decided to depreciate $130,000 of equipment using the straight-line method for their books and using the 200% MACRS for tax purposes. Therefore, depreciation for the equipment will show up as $17,000 on their books and as $26,000 for tax. They want to ...

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