Exam 10: Property Acquisition and Cost Recovery

Olney LLC only purchased one asset this year.Olney LLC placed in service on July 19,2017 machinery and equipment (7-year property)with a basis of $850,000.Assume that Olney has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing,(but ignoring bonus expensing).(Use MACRS Table 1 in the text)(Round final answer to the nearest whole number)

Tom Tom LLC purchased a rental house and land during the current year for $150,000.The purchase price was allocated as follows: $100,000 to the building and $50,000 to the land.The property was placed in service on May 22.Calculate Tom Tom's maximum depreciation for this first year.(Use MACRS Table 3 in the text)

Goodwill and customer lists are examples of §197 amortizable assets.

Yasmin purchased two assets during the current year.Yasmin placed in service computer equipment (5-year property)on May 26ᵗʰ with a basis of $10,000 and machinery (7-year property)on December 9ᵗʰ with a basis of $10,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 2 in the text)

During April of the current year,Ronen purchased a warehouse that he used for business purposes.The basis was $1,600,000.Calculate the maximum depreciation expense during the current year.(Use MACRS Table 5 in the text)

Tax depreciation is currently calculated under what system?

Businesses may immediately expense research and experimentation expenditures or they may elect to capitalize these costs and amortize them using the straight-line method over a period of not less than 60 months.

Lenter LLC placed in service on April 29,2017 machinery and equipment (7-year property)with a basis of $600,000.Assume that Lenter has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including section 179 expensing (but ignoring bonus expensing).(Use MACRS Table 1 in the text)

The mid-month convention applies to real property in the year of acquisition and disposition.

Janey purchased machinery on April 8ᵗʰ of the current year.The relevant costs for the year are as follows: machinery for $10,000,$800 shipping,$50 for delivery insurance,$500 for installation,$750 for sales tax,$150 for the annual tune up,and $200 of property taxes (an annual tax on business property).What is Janey's tax basis for the machinery?

Columbia LLC only purchased one asset this year.Columbia LLC placed in service on October 9,2017 machinery and equipment (7-year property)with a basis of $2,150,000.Assume that Columbia has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus expensing)for the year.(Use MACRS Table 2 in the text)(Round final answer to the nearest whole number)

Reid acquired two assets in 2017: computer equipment (5-year property)acquired on August 6ᵗʰ with a basis of $510,000 and machinery (7-year property)on November 9th with a basis of $510,000.Assume that Reid has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing (but not bonus expensing).(Use MACRS Table 1 in the text)

The method for tax amortization is always the straight-line method.

If the business use percentage for listed property falls below 50 percent,the only adjustment is all future depreciation must be calculated under the straight-line method.

The MACRS depreciation tables automatically switch to the straight-line method when the straight-line method yields a higher annual depreciation amount than the declining balance method.

Which is not an allowable method under MACRS?

Littman LLC placed in service on July 29,2017 machinery and equipment (7-year property)with a basis of $600,000.Littman's income for the current year before any depreciation expense was $100,000.Which of the following statements is true to maximize Littman's total depreciation expense for 2017? (Use MACRS Table 1 in the text)

Anne LLC purchased computer equipment (5-year property)on August 29 for $30,000 and used the half-year convention.Anne LLC did not take §179 or bonus depreciation in the year it acquired the computer equipment.During the current year,which is the fourth year Anne LLC owned the property,the property was disposed of on January 15.Calculate the maximum depreciation expense.(Use MACRS Table 1 in the text)

Crouch LLC placed in service on May 19,2017 machinery and equipment (7-year property)with a basis of $2,200,000.Assume that Crouch has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus expensing).(Use MACRS Table 1 in the text)

Businesses deduct percentage depletion when they sell the natural resource and they deduct cost depletion in the year they produce or extract the natural resource.