Sam owns a physical therapy Clinic. He purchases new rehabilitation equipment. The equipment Cost $100,000. Sam paid $5,000 to have the equipment installed and $2,000 to perform quality control tests on the machine to ensure it operates properly. Once the quality control test is complete, Sam started using the machinery on Oct. 1st. On December 1st Sam paid $1,000 to perform a periodic quality control test.

(a) How much can Sam Capitalize as the cost of the equipment?

(b) What is year 1's depreciation expense assuming Sam takes the maximum amount allowed?

- This is one of the practice problems that My Tax Professor provided for the class. It is like an example question of what we may see in a Tax research class if we decide to attend a Macc Program. I'm having a hard time finding the correct Internal revenue code section that goes into detail about the scenario I am looking at.