MACRS depreciation typically creates deferred tax liabilities early in the life of an asset.

Question

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MACRS depreciation is an accelerated depreciation method, which means that more depreciation is taken in the early years of an asset's life. This leads to lower taxable income in the early years, but higher taxable income in the later years. Therefore, deferred tax liabilities are created earlier in the life of an asset under MACRS depreciation.

MACRS Depreciation Typically Creates Deferred Tax Liabilities Early in the Life