On April 1, 2024, Titan Corporation purchases office equipment for $74,000. For tax reporting, the company uses MACRS and classifies the equipment as 5-year personal property. In 2024, this type of equipment is eligible for 60% first-year bonus depreciation. For financial reporting, the company uses straight-line depreciation. Assume the equipment has no residual value. Required: Calculate annual depreciation for the five-year life of the equipment according to MACRS. The company uses the half-year convention for tax reporting purposes. Calculate annual depreciation for the five-year life of the equipment according to straight-line depreciation. The company uses partial-year depreciation based on the number of months the asset is in service for financial reporting purposes. In which year(s) is tax depreciation greater than financial reporting depreciation 2. Year Depreciation 2024 2025 2026 2027 2028 2029 Total $0 1. Year Depreciation Basis for MACRS × Depreciation Rate per MACRS = MACRS Depreciation Bonus Depreciation Total Depreciation ?? 2024 20.00 % $5,920 $44,400 $50,320 2025 32.00 % 9,472 9,472 2026 19.20 % 5,683 5,683 2027 11.52 % 3,410 3,410 2028 11.52 % 3,410 3,410 2029 5.76 % 1,705 1,705 Total 100.00 % $29,600 $44,400 $74,000

SWFT Essntl Tax Individ/Bus Entities 2020

23rd Edition

ISBN:9780357391266

Author:Nellen

Publisher:Nellen

Chapter7: Property Transactions: Basis, Gain And Loss, And Nontaxable Exchanges

Section: Chapter Questions

Problem 1BD

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On April 1, 2024, Titan Corporation purchases office equipment for $74,000. For tax reporting, the company uses MACRS and classifies the equipment as 5-year personal property. In 2024, this type of equipment is eligible for 60% first-year bonus depreciation. For financial reporting, the company uses straight-line depreciation. Assume the equipment has no residual value. Required: Calculate annual depreciation for the five-year life of the equipment according to MACRS. The company uses the half-year convention for tax reporting purposes. Calculate annual depreciation for the five-year life of the equipment according to straight-line depreciation. The company uses partial-year depreciation based on the number of months the asset is in service for financial reporting purposes. In which year(s) is tax depreciation greater than financial reporting depreciation

Year	Depreciation
2024
2025
2026
2027
2028
2029
Total	$0

Year	Depreciation Basis for MACRS	×	Depreciation Rate per MACRS		=	MACRS Depreciation	Bonus Depreciation	Total Depreciation
	??
2024			20.00	%		$5,920	$44,400	$50,320
2025			32.00	%		9,472		9,472
2026			19.20	%		5,683		5,683
2027			11.52	%		3,410		3,410
2028			11.52	%		3,410		3,410
2029			5.76	%		1,705		1,705
Total			100.00	%		$29,600	$44,400	$74,000

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