The equipment will be depreciated on a MACRS 5-year basis, which implies the following depreciation schedule: MACRS Depreciation Year Rates 1 0.20 2 0.32 3 0.19 4 0.12 5 0.11 6 0.06 Assume that the company sells the equipment after three years for $400,000 and the company’s tax rate is 40 percent...
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What would be the tax consequences resulting from the sale of the equipment? Taxes on gain on sale When the machine is sold the total accumulated depreciation on it is: (0.20 + 0.32 + 0.19) ? $1,000,000 = $710,000. The book value of the equipment is: $1,000,000 - $710,000 = $290,000. The machine is sold for $400,000, so the gain is $400,000 - $290,000 = $110,000...
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