Scribd
Upload
20 views

Chapter 1

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.

Uploaded by

Kenny Wong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
20 views

Chapter 1

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.

Uploaded by

Kenny Wong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
You are on page 1/ 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

You might also like