Tan Company acquires a new machine (ten-year property)on January 15,2013,at a cost of $200,000.Tan also acquires another new machine (seven-year property)on November 5,2013,at a cost of $40,000.No election is made to use the straight-line method.The company does not make the § 179 election.Tan elects to not take additional first-year depreciation.Determine the total deductions in calculating taxable income related to the machines for 2013.

Question

Quizplus · Accepted Answer

- For the ten-year property, the MACRS depreciation deduction for 2013 is: $200,000 x 0.10 x 0.3333 (using MACRS Table A-1) = $6,660.
- For the seven-year property, the MACRS depreciation deduction for 2013 is: $40,000 x 0.1429 x 0.5897 (using MACRS Table A-2) = $3,056.
- The total depreciation deduction for 2013 is $6,660 + $3,056 = $9,716.
- This amount is then multiplied by the corporate tax rate of 35% to get the total deduction in calculating taxable income related to the machines for 2013: $9,716 x 0.35 = $3,400.60.
- The company can also take a bonus depreciation deduction of 50% of the cost of the qualified property (i.e. the machines) acquired and placed in service in 2013. However, the company elected to not take additional first-year depreciation, so this deduction is not relevant. 
- Therefore, the total deductions in calculating taxable income related to the machines for 2013 is $3,400.60.

Tan Company Acquires a New Machine (Ten-Year Property)on January 15,2013,at