Question 1

The election to use ADS is made on a year-by-year,property-class by property-class basis for real and personal property.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements regarding Sec.179 is true?

Accepted Answer

A) If a taxpayer places in service property costing more than the Sec.179 ceiling on the amount of property placed in service,the excess can be carried over to subsequent years. 
B) Amounts of the Sec.179 election in excess of the taxable income limitation are carried forward. 
C) Sec.179 carryforwards expire after five years. 
D) All of the above statements are true. 
A) If a taxpayer places in service property costing more than the Sec.179 ceiling on the amount of property placed in service,the excess can be carried over to subsequent years. 
B) Amounts of the Sec.179 election in excess of the taxable income limitation are carried forward. 
C) Sec.179 carryforwards expire after five years. 
D) All of the above statements are true.

Question 3

Jimmy acquires an oil and gas property interest for $600,000.Jimmy expects to recover 200,000 barrels of oil.Intangible drilling and development costs are $160,000 and are charged to expense.Other expenses are $40,000.During the year,25,000 barrels of oil are sold for $800,000.Jimmy's depletion deduction is

Accepted Answer

A) $120,000. 
B) $75,000. 
C) $160,000. 
D) $600,000. 
A) $120,000. 
B) $75,000. 
C) $160,000. 
D) $600,000.

Question 4

In November 2019,Kendall purchases a computer for $4,000.She does not apply Sec.179 expensing or bonus depreciation.The computer is the only personal property which she places in service during the year.What is her total depreciation deduction for this year?

Accepted Answer

A) $200 
B) $572 
C) $800 
D) $1,000 
A) $200 
B) $572 
C) $800 
D) $1,000

Question 5

Atiqa took out of service and sold a residential rental property on October 31 of this year.She had originally acquired the property in July ten years ago.The building (excluding the value of the land)cost $1,000,000.How much is her current year depreciation deduction?

Accepted Answer

A) $30,300 
B) $36,360 
C) $18,182 
D) $28,785 
A) $30,300 
B) $36,360 
C) $18,182 
D) $28,785

Question 6

In February 2019,Pietra acquired a new car costing $82,000.She used the car 80% in her sole proprietorship.Assuming Sec.179 is not elected,Pietra's maximum depreciation deduction allowable for the car will be

Accepted Answer

A) $65,600. 
B) $13,120. 
C) $14,480. 
D) $8,080. 
A) $65,600. 
B) $13,120. 
C) $14,480. 
D) $8,080.

Question 7

When depreciating 5-year property,the final year of depreciation will be year

Accepted Answer

A) 3) 
B) 4) 
C) 5) 
D) 6) 
A) 3) 
B) 4) 
C) 5) 
D) 6)

Question 8

On October 2,2019,Dave acquired and placed into service 5-year business equipment costing $70,000.No other acquisitions were made during the year.Dave does not apply Sec.179 expensing or bonus depreciation.The depreciation for this year is

Accepted Answer

A) $0. 
B) $3,500. 
C) $7,000. 
D) $14,000. 
A) $0. 
B) $3,500. 
C) $7,000. 
D) $14,000.

Question 9

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property)for $12,000.He used the van 30% for business.Bonus depreciation is not applied.The maximum depreciation deduction for the van is

Accepted Answer

A) $360. 
B) $720. 
C) $2,400. 
D) $1,980. 
A) $360. 
B) $720. 
C) $2,400. 
D) $1,980.

Question 10

Intangible drilling and development costs (IDCs)may be deducted as an expense or may be capitalized.

Accepted Answer

A) True 
 B)False

Question 11

Arthur uses a Chevrolet Suburban (GVWR 7,500 pounds)100% for business.He acquired and placed the vehicle in service in his business in January of the current year.The vehicle cost $65,000.The maximum deduction allowed this year is

Accepted Answer

A) $13,000. 
B) $18,000. 
C) $25,000. 
D) $65,000. 
A) $13,000. 
B) $18,000. 
C) $25,000. 
D) $65,000.

Question 12

In February 2019,Pietra acquired a new automobile for $82,000 and used the automobile 80% for business.In 2020 her business use of the auto was 70%.Pietra's depreciation deduction for 2020 will be

Accepted Answer

A) $11,270. 
B) $18,368. 
C) $12,670. 
D) $4,032. 
A) $11,270. 
B) $18,368. 
C) $12,670. 
D) $4,032.

Question 13

Galaxy Corporation purchases specialty software from a software development firm for use in its business as of January 1 of the current year at a cost of $90,000.No hardware was acquired.How much of the cost can Galaxy deduct this year?

Accepted Answer

A) $18,000 
B) $15,000 
C) $30,000 
D) $90,000 
A) $18,000 
B) $15,000 
C) $30,000 
D) $90,000

Question 14

On January 1 of the current year,Dentux Corp.purchases a patent from another corporation for $600,000.The patent has a remaining life of 10 years.The patent is the only asset purchased from that corporation.Also on January 1,Dentux purchases all of the assets of Fenton Corp.Included in the Fenton assets acquired is a patent worth $300,000 that has a 10-year remaining life.What is the allowable amortization deduction on the two patents?

Accepted Answer

A) $60,000 
B) $90,000 
C) $80,000 
D) $160,000 
A) $60,000 
B) $90,000 
C) $80,000 
D) $160,000

Question 15

Depreciable property includes business,investment,and personal-use assets.

Accepted Answer

A) True 
 B)False

Question 16

In May 2019,Cassie acquired a machine for $30,000 to use in her business.The machine is classified as 5-year property.Cassie does not expense the property under Sec.179 or bonus depreciation.Cassie's depreciation on the machine for 2019 is

Accepted Answer

A) $3,000. 
B) $6,000. 
C) $12,000. 
D) $15,000. 
A) $3,000. 
B) $6,000. 
C) $12,000. 
D) $15,000.

Question 17

A purchaser of the assets of a business must allocate the purchase price to the individual assets in accordance with the written agreement between the purchaser and the seller.Which of the following assets would be least preferred for purposes of allocating value from the purchaser point of view?

Accepted Answer

A) goodwill 
B) equipment 
C) office building 
D) inventory 
A) goodwill 
B) equipment 
C) office building 
D) inventory

Question 18

In April of 2018,Brandon acquired equipment which is five-year listed property (not an automobile)for $30,000 and used it 70% for business.Brandon did not claim Sec.179 or bonus depreciation.In 2019,his business use of the property dropped to 40%.Which of the following statements is true?

Accepted Answer

A) The change does not affect Brandon's previous depreciation. 
B) Brandon must recapture $2,100 as ordinary income. 
C) Brandon must recapture $4,200 as ordinary income. 
D) Brandon must amend the previous tax return and recompute depreciation. 
A) The change does not affect Brandon's previous depreciation. 
B) Brandon must recapture $2,100 as ordinary income. 
C) Brandon must recapture $4,200 as ordinary income. 
D) Brandon must amend the previous tax return and recompute depreciation.

Question 19

With respect to options to accelerate depreciation deductions for new qualifying assets,a taxpayer must elect into Sec.179 expensing,but elect out of bonus depreciation.

Accepted Answer

A) True 
 B)False

Question 20

The basis of an asset must be reduced by the depreciation allowable.

Accepted Answer

A) True 
 B)False

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

The election to use ADS is made on a year-by-year,property-class by property-class basis for real and personal property.

Which of the following statements regarding Sec.179 is true?

In November 2019,Kendall purchases a computer for $4,000.She does not apply Sec.179 expensing or bonus depreciation.The computer is the only personal property which she places in service during the year.What is her total depreciation deduction for this year?

Atiqa took out of service and sold a residential rental property on October 31 of this year.She had originally acquired the property in July ten years ago.The building (excluding the value of the land)cost $1,000,000.How much is her current year depreciation deduction?

In February 2019,Pietra acquired a new car costing $82,000.She used the car 80% in her sole proprietorship.Assuming Sec.179 is not elected,Pietra's maximum depreciation deduction allowable for the car will be

When depreciating 5-year property,the final year of depreciation will be year

On October 2,2019,Dave acquired and placed into service 5-year business equipment costing $70,000.No other acquisitions were made during the year.Dave does not apply Sec.179 expensing or bonus depreciation.The depreciation for this year is

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property)for $12,000.He used the van 30% for business.Bonus depreciation is not applied.The maximum depreciation deduction for the van is

Intangible drilling and development costs (IDCs)may be deducted as an expense or may be capitalized.

Arthur uses a Chevrolet Suburban (GVWR 7,500 pounds)100% for business.He acquired and placed the vehicle in service in his business in January of the current year.The vehicle cost $65,000.The maximum deduction allowed this year is

In February 2019,Pietra acquired a new automobile for $82,000 and used the automobile 80% for business.In 2020 her business use of the auto was 70%.Pietra's depreciation deduction for 2020 will be

Galaxy Corporation purchases specialty software from a software development firm for use in its business as of January 1 of the current year at a cost of $90,000.No hardware was acquired.How much of the cost can Galaxy deduct this year?

Depreciable property includes business,investment,and personal-use assets.

In May 2019,Cassie acquired a machine for $30,000 to use in her business.The machine is classified as 5-year property.Cassie does not expense the property under Sec.179 or bonus depreciation.Cassie's depreciation on the machine for 2019 is

A purchaser of the assets of a business must allocate the purchase price to the individual assets in accordance with the written agreement between the purchaser and the seller.Which of the following assets would be least preferred for purposes of allocating value from the purchaser point of view?

In April of 2018,Brandon acquired equipment which is five-year listed property (not an automobile)for $30,000 and used it 70% for business.Brandon did not claim Sec.179 or bonus depreciation.In 2019,his business use of the property dropped to 40%.Which of the following statements is true?

With respect to options to accelerate depreciation deductions for new qualifying assets,a taxpayer must elect into Sec.179 expensing,but elect out of bonus depreciation.

The basis of an asset must be reduced by the depreciation allowable.

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