1. 1. Blue Company, calendar year corporation, accrual basis taxpayer, only purchased equipment (5-year property) for $700,000 on October 1 of the current year. Blue has taxable income of $20,000 for the current year. Assuming Blue neither elects $179 expense nor bonus depreciation, compute Blue's MARS depreciation with respect to the equipment for the current year.

2. Finance, Incorporated provides financial services to its clients. In July 2022, Finance, Incorporated was retained to provide financial services for Jack for two years until July 2024. Jack prepaid Finance, Incorporated $240,000 for the financial services to be provided. Assuming Finance, Incorporated provided $10,000 of services each month, determine Finance, Incorporated's taxable income for 2022 and 2023 if Finance appropriately elects to defer income.