25 May Question 1. Tara purchased a machine for $40,000 to be used in her busines
Question
1. Tara purchased a machine for $40,000 to be used in her business. The cost recovery allowed and allowable for the three years the machine was used are as follows:
| Cost Recovery Allowed | Cost Recovery Allowable | |
| Year 1 | $16,000 | $ 8,000 |
| Year 2 | 9,600 | 12,800 |
| Year 3 | 5,760 | 7,680 |
If Tara sells the machine after three years for $15,000, how much gain should she recognize?
a. $3,480.
b. $6,360.
c. $9,240.
d. $11,480.
e. None of the above.
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2. Hazel purchased a new business asset (five-year asset) on September 30, 2014, at a cost of $100,000. On October 4, 2014, Hazel placed the asset in service. This was the only asset Hazel placed in service in 2014. Hazel did not elect § 179 or additional firstyear depreciation if available. On August 20, 2015, Hazel sold the asset. Determine the cost recovery for 2015 for the asset.
a. $14,250.
b. $19,000.
c. $23,750.
d. $38,000.
e. None of the above.
3. Tan Company acquires a new machine (ten-year property) on January 15, 2014, at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2014, at a cost of $40,000. No election is made to use the straightline method. The company does not make the § 179 election and elects to not take additional first-year depreciation if available. Determine the total deductions in calculating taxable income related to the machines for 2014.
a. $24,000.
b. $25,716.
c. $102,000.
d. $132,858.
e. None of the above.
4. James purchased a new business asset (three-year personalty) on July 23, 2013, at a cost of $40,000. James takes additional first-year depreciation Determine the cost recovery deduction for 2013.
a. $8,333.
b. $26,666.
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