Consider an asset that costs $459,000 and is depreciated straight-line to zero over its 6-year tax life. The asset is to be used in a 4-year project; at the end of the project, the asset can be sold for $120,000. If the relevant tax rate is 34 percent, what is the aftertax cash flow from the sale of this asset
Country/State/Province of question: new york
Based on the end of the 4th year:
The book value (after 4 years of depreciation) is $153,000
If you sell the item at $120,000, you have a realized LOSS of 33K against ordinary income.
So, you would realize a tax savings of 34% or 11,220 plus the cash from sale or a net cash of $ 131,220.
Of course, I have never heard of a 6-year type of property....
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