Question 1

To be depreciated, must an asset actually lose value each year?

Accepted Answer

No. For tax purposes, the term depreciat

Question 2

Rod had the following loss on business-use property: $$\begin{array} { | l | l | l | l | l| } 
\hline& \begin{array} { l } 
\text { Decrease in fair } \
\text { market value due } \
\text { to casualty }
\end{array} & \begin{array} { l } 
\text { Adjusted } \
\text { basis }
\end{array} & \begin{array} { l } 
\text { Insurance } \
\text { reimbursement }
\end{array} & \begin{array} { l } 
\text { Holding } \
\text { period }
\end{array} \
\hline \begin{array} { l } 
\text { Rod's storage shed } \
\text { was partially } \
\text { destroyed by fre. }
\end{array} & \$ 300 & \$ 700 & \$ 100 & 2 \text { years } \
\hline
\end{array}$$ Calculate the amount and nature of Rod's gain or loss as a result of this casualty.

Accepted Answer

​
$200 loss. The loss is a Sec

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A taxpayer eligible to use the installment method for reporting gain on the sale of an asset must use the installment method unless he or she elects out of the provision.

Accepted Answer

A) True 
 B)False

Question 5

Rod had the following business casualty in 2019: $$\begin{array} { | l | l | l | l | l| } 
\hline& \begin{array} { l } 
\text { Decrease in fair } \
\text { market value due } \
\text { to casualty }
\end{array} & \begin{array} { l } 
\text { Adjusted } \
\text { basis }
\end{array} & \begin{array} { l } 
\text { In surance } \
\text { reimbursement }
\end{array} & \begin{array} { l } 
\text { Holding } \
\text { period }
\end{array} \
\hline \begin{array} { l } 
\text { Business furniture } \
\text { vandalized. }
\end{array} & \$ 2,500 & \$ 500 & \$ 1,700 & \text { 20 years } \
\hline
\end{array}$$ Calculate the amount and nature of Rod's gain or loss as a result of this casualty.

Accepted Answer

$1,200 long-term Section 1231

Question 6

Verlin sells a commercial building and receives $50,000 in cash and a note for $60,000 at 10 percent interest. Verlin's adjusted basis in the building on the date of sale is $45,000 and he collects only the $50,000 down payment in the year of the sale.
a.If Verlin elects to recognize the total gain on the property in the year of sale, calculate the taxable gain.
b.Assuming Verlin uses the installment sale method, calculate the taxable gain he must report for the year of the sale.
c.Assuming Verlin collects $10,000 (not including interest) of the note principal in the year following the year of sale, calculate the amount of income recognized under the installment sale method.

Accepted Answer

The answer of Verlin sells a commercial building and receives...

Question 7

A taxpayer places a $1,050,000 5-year recovery period asset in service in 2019. This is the only asset placed in service in 2019. Assuming half-year convention, an election to expense under Section 179, and no income limitation, what is the amount of total cost recovery deduction (no bonus depreciation)?

Accepted Answer

A) $200,000 
B) $210,000 
C) $1,000,000 
D) $1,026,000 
E) $1,050,000 
A) $200,000 
B) $210,000 
C) $1,000,000 
D) $1,026,000 
E) $1,050,000

Question 8

Expenditures incurred to maintain an asset in good operating condition must be depreciated over the remaining useful life of the asset.

Accepted Answer

A) True 
 B)False

Question 9

ABC Corp bought a production machine on January 1, 2017 for $31,250. The company did not elect Section 179 expensing and elected out of claiming bonus depreciation in 2017, and is depreciating the machine using the MACRS accelerated depreciation tables for 5-year property. What is the 2019 depreciation (Year 3) deduction for the machine?

Accepted Answer

A) $6,000 
B) $6,250 
C) $10,000 
D) $12,500 
E) None of the above is correct 
A) $6,000 
B) $6,250 
C) $10,000 
D) $12,500 
E) None of the above is correct

Question 10

If insurance proceeds exceed the taxpayer's basis in property destroyed by fire and the proceeds are not invested in similar property, the taxpayer may be required to recognize a gain.

Accepted Answer

A) True 
 B)False

Question 11

On January 1, 2019, 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 2019 tax return for the purchased goodwill?

Accepted Answer

A) $0 
B) $5,333 
C) $5,750 
D) $6,000 
E) $90,000 
A) $0 
B) $5,333 
C) $5,750 
D) $6,000 
E) $90,000

Question 12

Which of the following is true of a like-kind exchange:

Accepted Answer

A) There must be no cash exchanged to qualify. 
B) The properties exchanged cannot be personal property. 
C) Office furniture can be exchanged for computers. 
D) A new holding period for capital gains treatment starts on the day the exchange is completed. 
A) There must be no cash exchanged to qualify. 
B) The properties exchanged cannot be personal property. 
C) Office furniture can be exchanged for computers. 
D) A new holding period for capital gains treatment starts on the day the exchange is completed.

Question 13

Taxpayers must use the straight-line method of depreciation for all productive assets.

Accepted Answer

A) True 
 B)False

Question 14

Aaron has a successful business with $50,000 of income in 2019. He purchased a new 7-year MACRS property with a cost of $7,000. For tax purposes, what is the largest amount Aaron can deduct in 2019 for the new asset?

Accepted Answer

A) $500 
B) $1,000 
C) $3,500 
D) $7,000 
A) $500 
B) $1,000 
C) $3,500 
D) $7,000

Question 15

In the current year, Henry, a sole proprietor, sold for $65,000 a machine that was used in his business. The machine had been purchased a few years ago for $50,000, and when it was sold, it had accumulated depreciation of $20,000 and an adjusted basis of $30,000. For the current year, how should this gain be treated?

Accepted Answer

A) Ordinary income of $35,000 
B) Section 1231 gain of $35,000 
C) Section 1231 gain of $20,000 and ordinary income of $15,000 
D) Section 1231 gain of $15,000 and ordinary income of $20,000 
E) None of the above 
A) Ordinary income of $35,000 
B) Section 1231 gain of $35,000 
C) Section 1231 gain of $20,000 and ordinary income of $15,000 
D) Section 1231 gain of $15,000 and ordinary income of $20,000 
E) None of the above

Question 16

If an automobile is purchased for 100 percent use in the taxpayer's business, the annual automobile depreciation limitations do not apply.

Accepted Answer

A) True 
 B)False

To be depreciated, must an asset actually lose value each year?

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

A taxpayer eligible to use the installment method for reporting gain on the sale of an asset must use the installment method unless he or she elects out of the provision.

Rod had the following business casualty in 2019: Decrease in fair market value due to casualty Adjusted basis In surance reimbursement Holding period Business furniture vandalized. \ 2,500 \ 500 \ 1,700 20 years Calculate the amount and nature of Rod's gain or loss as a result of this casualty.

Expenditures incurred to maintain an asset in good operating condition must be depreciated over the remaining useful life of the asset.

If insurance proceeds exceed the taxpayer's basis in property destroyed by fire and the proceeds are not invested in similar property, the taxpayer may be required to recognize a gain.

On January 1, 2019, 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 2019 tax return for the purchased goodwill?

Which of the following is true of a like-kind exchange:

Taxpayers must use the straight-line method of depreciation for all productive assets.

Aaron has a successful business with $50,000 of income in 2019. He purchased a new 7-year MACRS property with a cost of $7,000. For tax purposes, what is the largest amount Aaron can deduct in 2019 for the new asset?

If an automobile is purchased for 100 percent use in the taxpayer's business, the annual automobile depreciation limitations do not apply.

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

To be depreciated, must an asset actually lose value each year?

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

A taxpayer eligible to use the installment method for reporting gain on the sale of an asset must use the installment method unless he or she elects out of the provision.

Rod had the following business casualty in 2019: Decrease in fair market value due to casualty Adjusted basis In surance reimbursement Holding period Business furniture vandalized. \ 2,500 \ 500 \ 1,700 20 years Calculate the amount and nature of Rod's gain or loss as a result of this casualty.

Expenditures incurred to maintain an asset in good operating condition must be depreciated over the remaining useful life of the asset.

If insurance proceeds exceed the taxpayer's basis in property destroyed by fire and the proceeds are not invested in similar property, the taxpayer may be required to recognize a gain.

On January 1, 2019, 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 2019 tax return for the purchased goodwill?

Which of the following is true of a like-kind exchange:

Taxpayers must use the straight-line method of depreciation for all productive assets.

Aaron has a successful business with $50,000 of income in 2019. He purchased a new 7-year MACRS property with a cost of $7,000. For tax purposes, what is the largest amount Aaron can deduct in 2019 for the new asset?

If an automobile is purchased for 100 percent use in the taxpayer's business, the annual automobile depreciation limitations do not apply.

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