Exam 26: Depreciation,cost Recovery,amortization,and Depletion

Tronco Inc.placed in service a truck costing $40,000 on January 15 of this year.On November 1,the company placed in service $200,000 of construction equipment.Tronco is a calendar-year taxpayer.When calculating MACRS depreciation,Tronco must apply the mid-quarter convention to the construction equipment,but will use the half-year convention for the truck.

For real property placed in service after 1986,depreciation under the MACRS system is calculated using the

Most taxpayers elect to expense R&E expenditures because of the immediate tax benefit.

Once the business use of listed property falls to 50% or below,the alternative depreciation system must be used for the current year and all subsequent years,even if the business use percentage increases to more than 50% in a subsequent year.

When a taxpayer leases an automobile for 100% business purposes,the entire lease payment is deductible.

In order for an asset to be depreciated in the year of purchase,it must be placed in service before year's end.

A taxpayer owns an economic interest in an oil and gas property.She is allowed to deduct the smaller of cost depletion or percentage depletion.

The Section 179 expensing election is available on an annual basis for property purchased during the year.

On January 3,2016,John acquired and placed into service business tools costing $10,000.The tools have a 3-year class life.No other assets were purchased during that year.The depreciation in 2019 for those tools is (Sec.179 and bonus depreciation were not applied)

On August 11,2019,Nancy acquired and placed into service residential rental property,which cost $430,000; the cost of the land has been excluded.Nancy annually elects the maximum allowed Sec.179 deduction.The total depreciation for the year is (rounded)

The mid-quarter convention applies to personal and real property.

Residential rental property is defined as property from which more than 80% of the gross rental income is rental income from dwelling units.

Terra Corporation,a calendar-year taxpayer,purchases and places into service machinery with a 7-year life that costs $1,160,000 on April 27,2019.It was placed in service early in the year and was the only addition this year.Terra elects to depreciate the maximum under Sec.179 and does not apply bonus depreciation.Terra's taxable income for the year before the Sec.179 deduction is $1,700,000.What is Terra's total depreciation deduction related to this property?

Sec.179 tax benefits are recaptured if at any time an asset is converted to personal use.

Capital improvements to real property must be depreciated over the remaining life of the property on which the improvements were made.

On April 12,2018,Suzanne bought a computer for $20,000 for business use.This was the only purchase for that year.Suzanne used the most accelerated depreciation method available but did not apply Sec.179 or bonus depreciation.Suzanne sells the machine in 2019.The depreciation on the computer for 2019 is

In computing MACRS depreciation in the year of disposition of personal property used in a trade or business,the half-year convention must be applied to the amounts in the tables if the half-year convention was used in the year the asset was placed into service.

Land,buildings,equipment,and common stock are examples of tangible property.

In accounting for research and experimental expenditures incurred in 2019,all of the following alternatives are available with the exception of

Under the MACRS rules,salvage value is not considered in the computation of the cost-recovery or depreciation amount.