Allison purchased equipment that cost $100,000 for use in her business. She expects the equipment to be useful for the business for the next 8 years. Which of the following choices correctly describes the tax treatment of the cost of the equipment?

a.) The equipment should NOT be deducted until the year Allison sells or disposes of it.

b.) The equipment should be capitalized and depreciated according to the tax code

c.) The equipment should be deducted in the year it is purchases

Question

Lightning

Business

9 March, 23:46

Allison purchased equipment that cost $100,000 for use in her business. She expects the equipment to be useful for the business for the next 8 years. Which of the following choices correctly describes the tax treatment of the cost of the equipment?

a.) The equipment should NOT be deducted until the year Allison sells or disposes of it.

b.) The equipment should be capitalized and depreciated according to the tax code

c.) The equipment should be deducted in the year it is purchases

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Answers (1)

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Rodolfo Randall · Answer 1

b.) The equipment should be capitalized and depreciated according to the tax code

Explanation:

Depreciation under the Income Tax Act is a deduction allowed for the decline in the real value of a tangible or intangible asset used by a taxpayer. The Income Tax Department uses the concept of depreciation for the purpose of writing off the cost of an asset over its useful life.