Terrance Inc., a calendar year taxpayer, purchased used equipment for $2,765,000 and placed it in service on March 4, 2016. The equipment was seven-year recovery property and was the only depreciable asset that Terrance purchased during 2016.
a. Compute Terrance's tax depreciation with respect to the equipment for 2016 and 2017.
b. Compute Terrance's adjusted basis in the equipment in December 31, 2017.
c. How would your answer to a. change if the equipment was new instead of used?

Question

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The Answer of Terrance Inc., a calendar year taxpayer, purchased used equipment for $2,765,000 and placed it in service on March 4, 2016. The equipment was seven-year recovery property and was the only depreciable asset that Terrance purchased during 2016.
a. Compute Terrance's tax depreciation with respect to the equipment for 2016 and 2017.
b. Compute Terrance's adjusted basis in the equipment in December 31, 2017.
c. How would your answer to a. change if the equipment was new instead of used?