Question 1

Taxpayers choosing the election to expense:

Accepted Answer

A) May depreciate the amount of the asset cost that exceeds the amount allowed under the election to expense. 
B) Will have the maximum that can be expensed under the election reduced by $0.50 for each dollar by which the cost of the asset acquired exceeds a specified limit. 
C) May not carry over any amounts elected which are not allowed because of taxable income limitations. 
D) May expense a $125,000 automobile so long as it is used 100 percent for business. 
A) May depreciate the amount of the asset cost that exceeds the amount allowed under the election to expense. 
B) Will have the maximum that can be expensed under the election reduced by $0.50 for each dollar by which the cost of the asset acquired exceeds a specified limit. 
C) May not carry over any amounts elected which are not allowed because of taxable income limitations. 
D) May expense a $125,000 automobile so long as it is used 100 percent for business.

Question 2

In a like-kind exchange, relief from a liability is treated as boot.

Accepted Answer

A) True 
 B)False

Question 3

Robert acquired his rental property 10 years ago for $110,000 and sold it in the current year for $230,000. The accumulated straight-line depreciation on the property at the time of the sale was $35,000. Robert is in the 32 percent tax bracket for ordinary income.
a. What is Robert's gain on the sale of his rental property?
b. How is the gain taxed? (i.e., what tax bracket is the gain subject to)?

Accepted Answer

a. $155,000. Calculated as $230,000 − ($

Question 4

Depreciation refers to the physical deterioration or loss of value of an asset.

Accepted Answer

A) True 
 B)False

Question 5

Section 179 immediate expensing can be taken on used property.

Accepted Answer

A) True 
 B)False

Question 6

Give the depreciable or amortizable recovery periods for 2019 tax purposes for these assets:

Automobiles
Business furniture
Computers
Residential real estate
Commercial real estate
Land
Purchased goodwill

Accepted Answer

Automobiles: 5 years
Business furniture:

Question 7

In the current year, Keyaki Construction Company exchanged a building, which cost $530,000 and had accumulated depreciation of $160,000, for a new building having a fair market value of $650,000. In connection with the exchange, Keyaki paid $280,000 in cash. What is the tax basis of the new building?

Accepted Answer

A) $370,000 
B) $530,000 
C) $650,000 
D) $690,000 
E) None of the above 
A) $370,000 
B) $530,000 
C) $650,000 
D) $690,000 
E) None of the above

Question 8

An asset (not an automobile) put in service in June 2019 has a depreciable basis of $2,065,000, a recovery period of 5 years, and is the only asset placed in service this year. Assuming bonus depreciation is used, a half-year convention, and the expensing election is not made, what is the maximum amount of cost that can be deducted in 2019?

Accepted Answer

A) $411,000 
B) $1,411,000 
C) $1,427,000 
D) $2,065,000 
E) None of the above 
A) $411,000 
B) $1,411,000 
C) $1,427,000 
D) $2,065,000 
E) None of the above

Question 9

197 intangibles:

Accepted Answer

A) Are amortized based on current fair market value rather than their actual cost. 
B) Must be amortized over a 15 year life, regardless of their actual life. 
C) Include intangible assets created and not purchased by the taxpayer. 
D) Do not include purchased goodwill or going-concern value. 
A) Are amortized based on current fair market value rather than their actual cost. 
B) Must be amortized over a 15 year life, regardless of their actual life. 
C) Include intangible assets created and not purchased by the taxpayer. 
D) Do not include purchased goodwill or going-concern value.

Question 10

Cork Oak Corporation purchased a heavy-duty truck (not considered a passenger automobile for purposes of the listed property and luxury automobile limitations) on May 1, 2019 for use in its business. The truck, with a cost basis of $24,000, has a 5-year estimated life. It also is 5-year recovery property. How much depreciation should be taken on the truck for the 2019 calendar tax year using the conventional (for financial accounting purposes) straight-line depreciation method?

Accepted Answer

A) $400 
B) $2,400 
C) $3,200 
D) $4,800 
E) None of the above 
A) $400 
B) $2,400 
C) $3,200 
D) $4,800 
E) None of the above

Question 11

Which one of the following may not be depreciated using an accelerated method?

Accepted Answer

A) A farming tractor 
B) A computer used strictly for the farming business 
C) A corn-husking machine 
D) A farm truck that is operated for personal use more than 50 percent of the time 
E) All of the above items may be depreciated using an accelerated method 
A) A farming tractor 
B) A computer used strictly for the farming business 
C) A corn-husking machine 
D) A farm truck that is operated for personal use more than 50 percent of the time 
E) All of the above items may be depreciated using an accelerated method

Question 12

Casualty gains and losses from business or investment property:

Accepted Answer

A) May be treated differently depending on whether the property has been held 1 year or less or has been held over 1 year. 
B) Are treated the same as casualty gains and losses from personal property. 
C) Are subject to the 10 percent of adjusted gross income limitation. 
D) Are not subject to the depreciation recapture provisions. 
A) May be treated differently depending on whether the property has been held 1 year or less or has been held over 1 year. 
B) Are treated the same as casualty gains and losses from personal property. 
C) Are subject to the 10 percent of adjusted gross income limitation. 
D) Are not subject to the depreciation recapture provisions.

Question 13

If the proceeds from the sale of property will be collected over a period of more than one year, a taxpayer is required to use the installment method.

Accepted Answer

A) True 
 B)False

Question 14

Simon sold investment property 2 years ago for $750. Simon's basis in the property was $200. Simon is receiving $150 per year from the buyer. Simon reports this income on the installment method. If Simon collects $150 in principal during the current year, how much gain should he report from the sale for the year?

Accepted Answer

A) $0 
B) $75 
C) $90 
D) $110 
E) None of the above 
A) $0 
B) $75 
C) $90 
D) $110 
E) None of the above

Question 15

An asset (not an automobile) placed in service in June 2019 has a depreciable basis of $35,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2019?

Accepted Answer

A) $7,000 
B) $17,500 
C) $21,000 
D) $24,500 
E) $35,000 
A) $7,000 
B) $17,500 
C) $21,000 
D) $24,500 
E) $35,000

Question 16

In the current year, Tim sells Section 1245 property for $28,000 that he had purchased 6 years ago. Tim has claimed $7,000 in depreciation on the property and originally purchased it for $20,000. How much of the gain is taxable as ordinary income?

Accepted Answer

A) $7,000 
B) $8,000 
C) $13,000 
D) $18,000 
E) None of the above is correct 
A) $7,000 
B) $8,000 
C) $13,000 
D) $18,000 
E) None of the above is correct

Question 17

In calculating depreciation:

Accepted Answer

A) Straight-line depreciation is higher than double declining balance depreciation in the early years. 
B) Straight-line depreciation is higher than double declining balance depreciation in the later years. 
C) Double declining balance is a method of straight-line depreciation. 
D) MACRS depreciation requires that salvage value be taken into account. 
A) Straight-line depreciation is higher than double declining balance depreciation in the early years. 
B) Straight-line depreciation is higher than double declining balance depreciation in the later years. 
C) Double declining balance is a method of straight-line depreciation. 
D) MACRS depreciation requires that salvage value be taken into account.

Question 18

Sally acquired an apartment building 15 years ago for $150,000 and sold it for $410,000 in the current year. At the time of the sale, there is $65,000 of accumulated straight-line depreciation on the apartment building. Assuming Sally is in the 32 percent tax bracket for ordinary income, how much of her gain is taxed at 15 percent?

Accepted Answer

A) None 
B) $65,000 
C) $260,000 
D) $325,000 
E) $345,000 
A) None 
B) $65,000 
C) $260,000 
D) $325,000 
E) $345,000

Question 19

Under MACRS, the same method of depreciation (accelerated or straight-line) must be used for all property in a given class placed in service during a tax year.

Accepted Answer

A) True 
 B)False

Question 20

The maximum annual Section 179 immediate expensing deduction in 2019 is $1,020,000.

Accepted Answer

A) True 
 B)False

Taxpayers choosing the election to expense:

In a like-kind exchange, relief from a liability is treated as boot.

Depreciation refers to the physical deterioration or loss of value of an asset.

Section 179 immediate expensing can be taken on used property.

Give the depreciable or amortizable recovery periods for 2019 tax purposes for these assets: Automobiles Business furniture Computers Residential real estate Commercial real estate Land Purchased goodwill

197 intangibles:

Which one of the following may not be depreciated using an accelerated method?

Casualty gains and losses from business or investment property:

If the proceeds from the sale of property will be collected over a period of more than one year, a taxpayer is required to use the installment method.

An asset (not an automobile) placed in service in June 2019 has a depreciable basis of $35,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2019?

In the current year, Tim sells Section 1245 property for $28,000 that he had purchased 6 years ago. Tim has claimed $7,000 in depreciation on the property and originally purchased it for $20,000. How much of the gain is taxable as ordinary income?

In calculating depreciation:

Under MACRS, the same method of depreciation (accelerated or straight-line) must be used for all property in a given class placed in service during a tax year.

The maximum annual Section 179 immediate expensing deduction in 2019 is $1,020,000.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Payroll, Estimated Payments and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 8: Depreciation and Sale of Business Property

Taxpayers choosing the election to expense:

In a like-kind exchange, relief from a liability is treated as boot.

Depreciation refers to the physical deterioration or loss of value of an asset.

Section 179 immediate expensing can be taken on used property.

Give the depreciable or amortizable recovery periods for 2019 tax purposes for these assets: Automobiles Business furniture Computers Residential real estate Commercial real estate Land Purchased goodwill

197 intangibles:

Which one of the following may not be depreciated using an accelerated method?

Casualty gains and losses from business or investment property:

If the proceeds from the sale of property will be collected over a period of more than one year, a taxpayer is required to use the installment method.

An asset (not an automobile) placed in service in June 2019 has a depreciable basis of $35,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2019?

In the current year, Tim sells Section 1245 property for $28,000 that he had purchased 6 years ago. Tim has claimed $7,000 in depreciation on the property and originally purchased it for $20,000. How much of the gain is taxable as ordinary income?

In calculating depreciation:

Under MACRS, the same method of depreciation (accelerated or straight-line) must be used for all property in a given class placed in service during a tax year.

The maximum annual Section 179 immediate expensing deduction in 2019 is $1,020,000.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Payroll, Estimated Payments and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters