What is the basis of the machine after three years

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Reference no: EM132421303

The class is for Income tax 1 for 2018 for individual

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

a) What is the basis of the machine after three years?

b) If Tara sells the machine at the end of three years for $15,000, how much gain should she recognize?

Reference no: EM132421303

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