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    Chapter 1

    Uploaded by

    Kenny Wong
    This document discusses various tax implications related to the sale of assets. It explains that the tax on selling an asset is calculated as [Selling Price - Book Value] x Tax Rate. The gain or loss on disposal is also defined. It provides examples of calculating depreciation, taxable income, and tax amounts for both old and new machinery over multiple years.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Chapter 1

    Uploaded by

    Kenny Wong
    15 views18 pages
    This document discusses various tax implications related to the sale of assets. It explains that the tax on selling an asset is calculated as [Selling Price - Book Value] x Tax Rate. The gain or loss on disposal is also defined. It provides examples of calculating depreciation, taxable income, and tax amounts for both old and new machinery over multiple years.

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    © © All Rights Reserved

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    This document discusses various tax implications related to the sale of assets. It explains that the tax on selling an asset is calculated as [Selling Price - Book Value] x Tax Rate. The gain or loss on disposal is also defined. It provides examples of calculating depreciation, taxable income, and tax amounts for both old and new machinery over multiple years.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    15 views18 pages

    Chapter 1

    Uploaded by

    Kenny Wong
    This document discusses various tax implications related to the sale of assets. It explains that the tax on selling an asset is calculated as [Selling Price - Book Value] x Tax Rate. The gain or loss on disposal is also defined. It provides examples of calculating depreciation, taxable income, and tax amounts for both old and new machinery over multiple years.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 18

    Tutorial 1 BA208 FM2

    0.83
    0.827

    = 50k - (50kx0.827)
    8.650
    Tax = SP - BV x Tax rate

    18.540

    58.540
    Tax = SP - BV x Tax rate
    9.120

    20 0.4
    137.12
    Tax = [SP - BV] x Tax ra
    9.800

    Tax = SP - BV x Tax rate


    -0.800
    2000
    Gain on disposal/sale = SP - BV
    Tax on selling of asset = [SP - BV] x 40%
    BV = IC - AD
    Tax on selling of asset = [SP - (IC-AD)] x 40%

    SP - BV x Tax rate
    Depreciation rate for new machine
    0.33
    0.45
    = [SP - BV] x Tax rate 0.15
    0.93

    Depreciation rate for new machine


    SP - BV x Tax rate 0.20
    0.32
    0.19
    0.12
    0.12
    0.95
    480k = 1.2m x 40%
    Installed cost = 1.9m+0.1m = 2m
    2,000,000

    480k = 1.2m x 40%

    Installed cost = 1.9m+0.1m = 2m


    2,000,000

    Years MACRS Depreciation


    1 20% 400,000
    2 32% 640,000
    3 19% 380,000
    4 12% 240,000
    5 12% 240,000
    6 5% 100,000

    Years NPAT + Depreciation =Incremental


    1 192,000 400,000 592,000
    2 48,000 640,000 688,000
    3 204,000 380,000 584,000
    4 288,000 240,000 528,000
    5 288,000 240,000 528,000
    6 372,000 100,000 472,000
    Change to 2 years of usable life remaining

    Tax implication
    SP>BV = Gain on disposal Tax
    SP<BV = Loss on disposal claim for tax rebate/refund

    Tax = SP - BV x Tax rate


    16.200
    16.240 if you are using 3 decimal places of depreciation rate.

    $50k - $14.5k = $35.5k


    14.5 recaptured depreciation
    5 Capital Gain

    Installed cost
    Old Machine/ Years 1 2 3 4 5
    Revenue 674,000 676,000 680,000 678,000 674,000
    Exp (Excluded dep,
    interest and tax) 660,000 660,000 660,000 660,000 660,000
    EBDIT 14,000 16,000 20,000 18,000 14,000
    Depreciation 6,000 6,000 2,500 - -

    Installed cost
    New Machine/ Years 1 2 3 4 5
    Revenue 750000 750000 750000 750000 750000
    Exp (Excluded dep,
    interest and tax) 720000 720000 720000 720000 720000
    EBDIT 30000 30000 30000 30000 30000
    Depreciation 16,000 25,600 15,200 9,600 9,600
    50000
    6 Years MACRS Depreciation
    - 1 20% 10,000

    - 2 32% 16,000
    - 3 19% 9,500
    - 4 12% 6,000
    5 12% 6,000
    6 5% 2,500
    80000
    6 Years MACRS Depreciation
    0 1 20% 16,000

    0 2 32% 25,600
    0 3 19% 15,200
    4,000 4 12% 9,600
    5 12% 9,600
    6 5% 4,000

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