ACC 281 Week 2 DQ5 - 7420

Solution Posted by
3number
Solution Detail
Price: $2.00
  • From: ,
  • Posted on: Wed 11 Apr, 2012
  • Request id: None
  • Purchased: 0 time(s)
  • Average Rating: No rating
Request Description


Why do you think that Congress allows companies to use an accelerated method of depreciation to reduce the income tax for the current year?  Will the income tax for future years increase as a result of the acceleration in the current year?  Why or why not?

For a quick history update, in 1971 Congress introduced the Class Life Asset Depreciation Range (ADR) system in an attempt to simplify calculations and provide some uniformity. Under ADR, the IRS prescribed lives for classes of assets based on the nature or use of the asset. Such classes included general classes (such as office equipment) and industry classes (such as assets used in the manufacture of rubber goods). In 1981 Congress again changed the depreciation system for shorter lives for recovery of costs which was known as the Accelerated Cost Recovery System (ACRS). It was again changed to Modified Accelerated Cost Recovery System (MACRS) in 1986 as part of the Tax Reform Act of 1986. 

I think the reason why congress allows companies to use an accelerated method of depreciation is to assist in the younger years of a business financially and to promote economic growth through purchased goods. The accelerated method of depreciation provides a larger tax write off which would come in handy for most new businesses. The reason I say new businesses is because they are the ones usually purchasing the most equipment at one time to start their company. As a new business owner or anyone in business, they know that the early years of equipment provides larger write offs which promotes purchasing. It ends up being a cycle. 

Solution Description


Why do you think that Congress allows companies to use an accelerated method of depreciation to reduce the income tax for the current year?  Will the income tax for future years increase as a result of the acceleratio