straight line depreciation
= $11,285,000 Total depreciation using Straight-line method = $12,135,000 Discount rate = 5% Tax rate = 35% Cumulative present value of tax savings using cost segregation technique at 5% = $133,563
Here, an impairment loss would be recognized only in the situation where the straight line depreciation
method is used, since that is the only situation where the carrying value exceeds the sum of future cash flows.
On the other hand, when a company purchases equipment and uses the straight line depreciation
method for regular tax purposes, a depreciation preference is not created.
312(k), which allows for the computation of basis using straight line depreciation
if the taxpayer's current basis has been determined by the use of accelerated depreciation.
Leasing is preferable to buying: the higher the asset cost, the lower the lease payments, the lower the tax rate, the higher the after-tax cost of equivalent financing, the lower the salvage value, and if straight line depreciation