A nanotube forming asset was purchased 3 years ago for $240,000. It was just sold for $285,000. The asset was depreciated by the MACRS method with n = 5 years and has a current book value of $69,120. Determine the amount of (a) CG and DR, and (b) prepare a spreadsheet showing the taxes each year for Te = 28%. Assume the asset’s GI = $100,500 and OE = $50,000 for each of the 3 years.

What will be an ideal response?


(a) CG = 285,000 – 240,000

= $45,000



DR = 240,000(0.2 + 0.32 + 0.192)

= $170,880



(b) Taxes are shown in column I. TI for year 3 must include CG and DR as fully taxable.

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