Exam 7: Accounting Periods and Methods and Depreciation

William, a cash-basis sole proprietor, had the following receipts and disbursements for 2015: For 2015, what amount should William report as net earnings from self-employment?

Jenny constructed a building for use as a residential rental property. The cost of the building was $82,488, and it was placed in service on August 1, 1991. The building has a 27.5-year MACRS life. What is the amount of depreciation on the building for 2015 for tax purposes?

Depreciation is the process of allocating the cost of assets to expense over a period of years.

Which one of the following is a Section 197 intangible?

Taxpayers choosing the election to expense:

From the records of Tom, a cash basis sole proprietor, the following information was available: What amount should Tom report as net earnings from self-employment?

What is the maximum depreciation expense deduction for Year 2 (2016) for a passenger automobile, used 100 percent for qualified business use, placed in service on June 15, 2015 and costing $16,000 (the election to expense is not made and no bonus depreciation was taken)?

Goodwill is considered to be a Section 197 asset amortized over 15 years for tax purposes.

For each of the following independent situations, indicate with a "Yes" if the asset is listed property. Indicate with a "No" if the asset is not listed property. a.Airplane used 25 percent for business ______ b.Fleet of cabs ______ c.A moving van ______ d.DVD player used 10 percent for business ______ e.A digital camera used 30 percent of the time to list eBay items ______

The annual automobile depreciation limitations apply only to the first four years of the asset's recovery period.

If listed property is used more than 50 percent in a qualified business use, depreciation must be calculated using the straight-line method.

Which of the following is true about the MACRS depreciation system?

Calculate the following amounts: a.The first year of depreciation on a residential rental building costing $100,000, purchased on November 30. b.The first year of depreciation on an auto used 100 percent in business, costing $30,000, purchased in May 2015.(No bonus depreciation deducted). c.The second year of depreciation on a computer used exclusively for business, costing $7,000, purchased May 2014. d.The third year of depreciation on business furniture costing $1,000, purchased in July 2013, using the half-year convention and accelerated depreciation.

Shellie purchased a passenger automobile on March 2, 2015. She paid $15,000 for the automobile and can support business use of 85 percent. Calculate the amount of depreciation on the automobile for 2015 using the accelerated MACRS method (if available), assuming Shellie does not make the election to expense or claim bonus depreciation.

The election to expense is not permitted where listed property does not meet the qualified business use test.

A taxpayer places a $50,000 5-year recovery period asset in service in 2015. This is the only asset placed in service in 2015. Assuming half-year convention, no immediate expensing, and no income limitation, what is the amount of bonus depreciation (assuming extended into 2015)?​

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

​An asset (not an automobile) put in service in June 2015 has a depreciable basis of $35,000 and a recovery period of 5 years. Assuming bonus depreciation is extended into 2015, a half-year convention, and the expensing election is made, what is the maximum amount of cost that can be deducted in 2015 (assume no income limitation)?

Residential real estate is currently assigned a 27.5-year cost recovery period under the Modified Accelerated Cost Recovery System.

On January 1, 2015, Ted purchased a small software company for $200,000. He paid $120,000 for the fixed assets of the company and $80,000 for goodwill. How much amortization may Ted deduct on his 2015 tax return for the purchased goodwill?