Question 1

Research and experimentation expenditures can be:

Accepted Answer

A) Expensed when incurred. 
B) Amortized over 60 or more months. 
C) Either (a) or (b). 
D) Neither (a) nor (b). 
A) Expensed when incurred. 
B) Amortized over 60 or more months. 
C) Either (a) or (b). 
D) Neither (a) nor (b).

Question 2

Moore Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on April 2nd.What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

Accepted Answer

A) $3,500 and $138 
B) $2,500 and $426 
C) $1,500 and $706 
D) $500 and $958 
A) $3,500 and $138 
B) $2,500 and $426 
C) $1,500 and $706 
D) $500 and $958

Question 3

The first and last years of MACRS depreciation deductions for a 5-year asset costing $10,000 using the half-year convention are:

Accepted Answer

A) $2,000 and $2,000 
B) $2,000 and $1,152 
C) $2,000 and $576 
D) $2,000 and $1,000 
A) $2,000 and $2,000 
B) $2,000 and $1,152 
C) $2,000 and $576 
D) $2,000 and $1,000

Question 4

The lease inclusion amount increases the deduction a person may take for business use of a leased automobile.

Accepted Answer

A) True 
 B)False

Question 5

Chipper, a calendar-year corporation, purchased new machinery for $1,135,000 in February, 2019.In October, it purchased $2,105,000 of used machinery.What is Chipper's maximum cost recovery deduction for 2019?

Accepted Answer

A) $1,243,621 
B) $3,240,000 
C) $1,038,114 
D) $577,226 
A) $1,243,621 
B) $3,240,000 
C) $1,038,114 
D) $577,226

Question 6

In a basket purchase of a group of assets, the purchaser and the seller can agree to the value of the separate assets.

Accepted Answer

A) True 
 B)False

Question 7

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2019: $\begin{array}{lcr}
\underline{\text {Date Acquired}}&
\underline{\text {Asset Description}}&
\underline{\text {Cost}}\
\text { February 18}& \text { Warehouse Building } & \$ 2,450,000 \
 \text { June 2 }  & \text { Automobile } & 30,000 \
\text { August } 18& \text { Computer Equipment } & 220,000 \
\text { September } 20  & \text { Machinery } & 1,050,000 \
\text { December } 15& \text { Office Equipment } & 885,000
\end{array}$

All assets are used 100% for business use.The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000.The corporation has $3,000,000 income from operations before calculating depreciation deductions.Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2019.
To maximize its total cost recovery deduction, what was Sanjuro Corporation's cost recovery deduction for the computer equipment for 2019?

Accepted Answer

A) $44,000 
B) $110,000 
C) $132,000 
D) $220,000 
A) $44,000 
B) $110,000 
C) $132,000 
D) $220,000

Question 8

YumYum Corporation (a calendar-year corporation) moved into a new office building adjacent to its manufacturing plant in 2019.It purchased and placed in service the following assets during 2019: $\begin{array}{ccr}
\underline{\text {Date Acquired}}&
\underline{\text {Asset Description}}&\underline{\text {Cost}}\
\text { March 4 } & \text { New Office Building } & \$ 850,000 \
\text { March 15 } & \text { New Computer Equipment } & 45,000 \
\text { March 25 } & \text { New Office Furniture } & \$ 25,000 \
\text { August 20 } & \text { Used Machinery } & \$ 120,000 \
\text { December 15 } & \text { New Automobile } & \$ 30.000
\end{array}$

All assets are used 100% for business use.The office building does not include the cost of the land on which it is located that was an additional $300,000.The corporation had $900,000 income from operations before calculating depreciation deductions.If YumYum does not apply Section 179 expensing or bonus depreciation, but elects to use straight-line depreciation on all of its assets, how much is its 2019 depreciation deduction?

Accepted Answer

A) $17,281 
B) $28,972 
C) $35,134 
D) $35,394 
A) $17,281 
B) $28,972 
C) $35,134 
D) $35,394

Question 9

Wolfgang, a calendar-year taxpayer, purchased residential rental realty in April of year 1 for $150,000 ($50,000 of which was for the land).
A)What is Wolfgang's MACRS depreciation deduction in years 1 and 2?
B)What is his depreciation deduction in year 20 if he disposes of the asset in August of that year?
C)How would your answers change to (a) and (b) if the property is nonresidential realty?

Accepted Answer

a. Year 1: $100,000 x .02576 = $2,576; Y

Question 10

Software purchased in 2019 is eligible for

Accepted Answer

A) MACRS depreciation only 
B) straight-line amortization only 
C) Section 179 expensing and bonus depreciation 
D) Section 179 expensing but not bonus depreciation 
A) MACRS depreciation only 
B) straight-line amortization only 
C) Section 179 expensing and bonus depreciation 
D) Section 179 expensing but not bonus depreciation

Question 11

Joe started a new business this year.He had purchased a computer two years ago for $4,000 and decided to use it in his business until he could afford a new system.He could purchase a new computer with the same specifications for $1,800, but his used computer is worth only $1,100.What is his computer's basis for depreciation?

Accepted Answer

A) $1,100 
B) $1,800 
C) $4,000 
D) The computer cannot be depreciated because it was a personal asset. 
A) $1,100 
B) $1,800 
C) $4,000 
D) The computer cannot be depreciated because it was a personal asset.

Question 12

The cost of an asset with a useful life exceeding one year can be

Accepted Answer

A) Expensed immediately 
B) Capitalized until disposal 
C) Capitalized with part of the costs deducted annually 
D) All of the above are possible depending on the asset 
A) Expensed immediately 
B) Capitalized until disposal 
C) Capitalized with part of the costs deducted annually 
D) All of the above are possible depending on the asset

Question 13

Research expenditures must be capitalized and amortized over the period the research is expected to benefit the business.

Accepted Answer

A) True 
 B)False

Question 14

On June, 20, 2019, Simon Corporation (a calendar-year corporation) purchased and placed in service a new automobile costing $69,000.This vehicle is used 100% for business.Simon makes whatever elections are necessary to maximize its overall depreciation deduction for the year of acquisition. What is Simon Corporation's adjusted basis for the automobile at the end of 2021?

Accepted Answer

A) $0 
B) $18,640 
C) $25,100 
D) $34,800 
A) $0 
B) $18,640 
C) $25,100 
D) $34,800

Question 15

Depletion is the term used for the cost allocation of wasting assets.

Accepted Answer

A) True 
 B)False

Question 16

What is the maximum amount that can be spent on depreciable personalty in the last quarter of the year to avoid the mid-quarter convention if $240,000 of equipment was purchased in the first three quarters (and neither Sec.179 nor bonus depreciation is claimed)?

Accepted Answer

A) $80,000 
B) $968,000 
C) $160,000 
D) $240,000 
A) $80,000 
B) $968,000 
C) $160,000 
D) $240,000

Question 17

On June, 20, 2019, Simon Corporation (a calendar-year corporation) purchased and placed in service a new automobile costing $68,000.This vehicle is used 100% for business.Simon makes whatever elections are necessary to maximize its overall depreciation deduction for the year of acquisition. What is Simon Corporation's maximum cost recovery deduction for the automobile for 2022?

Accepted Answer

A) $0 
B) $9,581 
C) $9,700 
D) $16,100 
A) $0 
B) $9,581 
C) $9,700 
D) $16,100

Question 18

The first year's depreciation for equipment acquired in October by a calendar-year business would be based on 1½ months if it was the only asset acquired that year.

Accepted Answer

A) True 
 B)False

Question 19

All of the following are characteristics of percentage depletion except:

Accepted Answer

A) Depletion is determined using a statutory percentage times gross income. 
B) Percentage depletion can exceed the property's cost. 
C) Depletion in excess of cost results in a negative basis for property. 
D) Is an investment incentive provision. 
A) Depletion is determined using a statutory percentage times gross income. 
B) Percentage depletion can exceed the property's cost. 
C) Depletion in excess of cost results in a negative basis for property. 
D) Is an investment incentive provision.

Research and experimentation expenditures can be:

Moore Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on April 2^nd.What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

The first and last years of MACRS depreciation deductions for a 5-year asset costing $10,000 using the half-year convention are:

The lease inclusion amount increases the deduction a person may take for business use of a leased automobile.

Chipper, a calendar-year corporation, purchased new machinery for $1,135,000 in February, 2019.In October, it purchased $2,105,000 of used machinery.What is Chipper's maximum cost recovery deduction for 2019?

In a basket purchase of a group of assets, the purchaser and the seller can agree to the value of the separate assets.

Software purchased in 2019 is eligible for

The cost of an asset with a useful life exceeding one year can be

Research expenditures must be capitalized and amortized over the period the research is expected to benefit the business.

Depletion is the term used for the cost allocation of wasting assets.

What is the maximum amount that can be spent on depreciable personalty in the last quarter of the year to avoid the mid-quarter convention if $240,000 of equipment was purchased in the first three quarters (and neither Sec.179 nor bonus depreciation is claimed)?

The first year's depreciation for equipment acquired in October by a calendar-year business would be based on 1½ months if it was the only asset acquired that year.

All of the following are characteristics of percentage depletion except:

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 7: Property Acquisitions and Cost Recovery Deductions

Research and experimentation expenditures can be:

Moore Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on April 2nd.What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

The first and last years of MACRS depreciation deductions for a 5-year asset costing $10,000 using the half-year convention are:

The lease inclusion amount increases the deduction a person may take for business use of a leased automobile.

Chipper, a calendar-year corporation, purchased new machinery for $1,135,000 in February, 2019.In October, it purchased $2,105,000 of used machinery.What is Chipper's maximum cost recovery deduction for 2019?

In a basket purchase of a group of assets, the purchaser and the seller can agree to the value of the separate assets.

Software purchased in 2019 is eligible for

The cost of an asset with a useful life exceeding one year can be

Research expenditures must be capitalized and amortized over the period the research is expected to benefit the business.

Depletion is the term used for the cost allocation of wasting assets.

What is the maximum amount that can be spent on depreciable personalty in the last quarter of the year to avoid the mid-quarter convention if $240,000 of equipment was purchased in the first three quarters (and neither Sec.179 nor bonus depreciation is claimed)?

The first year's depreciation for equipment acquired in October by a calendar-year business would be based on 1½ months if it was the only asset acquired that year.

All of the following are characteristics of percentage depletion except:

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Moore Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on April 2^nd.What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?