Question

An in-place machine with B=$110,000 was depreciated by using Modified Accelerated Cost Recovery System (MACRS) over a 3-year period. The machine was sold for $60,000 at the end of year 2 when the company decided to import the item that required the use of the machine. In year 2 , gross income (Gl)=$1 million and operating expenses (OE)=$500,000. Determine the tax liability in year 2 if Te​=35% The tax liability in year 2 is determined to be $

Answer 1

The tax liability in year 2 cannot be accurately determined without specific depreciation details for the MACRS schedule. It requires the gross income, operating expenses, tax rate, and information on the sale of the depreciated machine.

Step-by-step explanation:

The question concerns the calculation of tax liability for a company using the Modified Accelerated Cost Recovery System (MACRS) to depreciate an in-place machine. To calculate the tax liability in year 2, we need to consider the machine's sale, gross income, operating expenses, and the tax rate.

The gross income (GI) is $1 million, the operating expenses (OE) are $500,000, and the tax rate (Te) is 35%. However, the depreciation of the machine and any gain or loss on its sale would also affect the taxable income. In this case, specific details on the depreciation amounts for the MACRS schedule are needed for a precise calculation. As this information is not provided, the accurate tax liability cannot be determined without it.