In year 1, Firm A paid $51,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,200 and $7,300 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 21 percent. Required: Compute Firm A’s net cash flow attributable to the asset purchase in each year. Compute Firm A’s adjusted basis in the asset at the end of each year.
In year 1, Firm A paid $51,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,200 and $7,300 depreciation with respect to the asset. Firm A’s marginal tax rate in both years was 21 percent. Required: Compute Firm A’s net cash flow attributable to the asset purchase in each year. Compute Firm A’s adjusted basis in the asset at the end of each year.
SWFT Essntl Tax Individ/Bus Entities 2020
23rd Edition
ISBN:9780357391266
Author:Nellen
Publisher:Nellen
Chapter12: Corporations: Organization, Capital Structure, And Operating Rules
Section: Chapter Questions
Problem 40P
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In year 1, Firm A paid $51,000 cash to purchase a tangible business asset. In year 1 and year 2, it deducted $3,200 and $7,300
Required:
- Compute Firm A’s net
cash flow attributable to the asset purchase in each year. - Compute Firm A’s adjusted basis in the asset at the end of each year.
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