Suber Inc., a calendar year taxpayer, purchased equipment for $800,000 and placed it in service on March 1. Suber’s chief engineer determined that the equipment had an estimated useful life of 120 months and a $50,000 residual value. For financial statement purposes, Suber uses the straight-line method to compute depreciation.
a. Compute book depreciation for the year.
b. Assuming that the equipment has a seven-year recovery period and is subject to the half-year convention, compute MACRS depreciation for the year.
c. Compute Suber’s book basis and tax basis in the equipment at the beginning of next year.