October through (9) ISys’ business months during year 1 x 3 December Year 1 straight-line amortization for costs $200 (8) x (9) Y2 Cost Recovery Original Remaining Depreciation Basis Expense Quarter Rate Expense $15,000 $15,000 4th 38.00% $5,700 Computer Equipment $10,000 $10,000 4th 27.55% $2,755 Office Equipment $3,000 $3,000 4th 27.55% $827 Furniture $66.67 $17,000 $5,000 $12,000 N/A x 12 $800 Start-up costs $18,000 HY 20.00% $3,600 Delivery van $4,000 HY 14.29% $572 Pinball machine See $10,000 N/A $500 Customer List Total Cost Recovery Expense $14,754 Description Amount Explanation (1) Customer list (section 197 intangible) $10,000 Given in problem (2) Recovery period in months 180 Section 197 (3) Monthly straight-line amortization 55.56 (1) / (2) (4) April through December x 9 Year 1 straight-line amortization for customer list $500 (3) x (4) ISys Answers’ form 4562 is as follows: c. ISys Answers’ basis is as follows: Adjusted Basis Year 1 Original Cost Year 2 Cost 2011 Ending Asset Basis Expense Recovery Recovery Basis Computer Equipment $15,000 $750 $5,700 $8,550
(9) ISys’ business months during year 1 x 3 October through December Year 1 straight-line amortization for costs $200 (8) x (9) Y2 Cost Recovery Original Basis Expense Remaining Quarter Rate Depreciation Expense Computer Equipment $15,000 $15,000 4th 38.00% $5,700 Office Equipment $10,000 $10,000 4th 27.55% $2,755 Furniture $3,000 $3,000 4th 27.55% $827 Start-up costs $17,000 $5,000 $12,000 N/A $66.67 x 12 $800 Delivery van $18,000 HY 20.00% $3,600 Pinball machine $4,000 HY 14.29% $572 Customer List $10,000 N/A See $500 Total Cost Recovery Expense $14,754 Description Amount Explanation (1) Customer list (section 197 intangible) $10,000 Given in problem (2) Recovery period in months 180 Section 197 (3) Monthly straight-line amortization 55.56 (1) / (2) (4) April through December x 9 Year 1 straight-line amortization for customer list $500 (3) x (4) ISys Answers’ form 4562 is as follows: c. ISys Answers’ basis is as follows: Adjusted Basis Asset Original Basis Expense Year 1 Cost Recovery Year 2 Cost Recovery 2011 Ending Basis Computer Equipment $15,000 $750 $5,700 $8,550