On June 1 of Year 1, Water Corporation places into service a machine costing $ 10 comma 000. The machine is seven-year property under the MACRS rules and has a 12-year class life. Water does not elect Sec. 179 expensing, and assume that bonus depreciation is not available for the property. Water Corporation has projected the following depreciation deductions and AMT adjustments for this machine (based on the half-year convention): Depreciation for Depreciation for Depreciation Regular Tax Purposes AMT Purposes AMT Adjustment Year 1 $1,429 $1,071 $358 Year 2 $2,449 $1,913 $536 Year 3 $1,749 $1,503 $246 Year 4 $1,249 $1,225 $24 Year 5 $893 $1,225 $(332) Year 6 $892 $1,225 $(333) Year 7 $893 $1,225 $(332) Year 8 $446 $613 $(167)

Requirement a. Determine

WaterWater's

gain or loss on the machine's sale for regular tax and AMT purposes. (Round intermediary calculations and the amounts you input in the cells to the nearest dollar.)

	Sale proceeds	-	Adjusted basis	=	Gain / (Loss)
Regular tax	$9,000	-	$5,247	=	$3,753
AMT	$9,000	-	$6,264	=	$2,736

The question is requirement b.

Requirement b. Determine the amount of Water's AMT adjustments for Year 3.

Water will have a

positive/negative

adjustment of $

for depreciation and a

positive/negative

adjustment of $