MACRS with Trade-In: In May 2011, your company traded in a computer and peripheral equipment, used in its business, that had a BV at that time of $25,000. A new, faster computer system having a fair market value of $300,000 was acquired. Because the vendor accepted the older computer as a trade-in, a deal was agreed to whereby your company would pay $225,000 cash for the new computer system.

a. What is the property class life and recovery year for the computer system?

b. Using MACRS GDS rates, how much depreciation can be deducted each year based on this class life?