Exam 9: Property Acquisition and Cost Recovery

Jaussi purchased a computer several years ago for $2,200 and used it for personal purposes.On November 10ᵗʰ of the current year,when the fair market value of the computer was $800,Jaussi converted it to business use.What is Jaussi's tax basis for the computer?

Cost depletion is available to all natural resource producers.

-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)

Business assets that tend to be used for both business and personal purposes are referred to as listed property.

How is the recovery period of an asset determined?

IN THE TEXT -Wheeler LLC purchased two assets during the current year (a full 12-month tax year).Wheeler placed in service computer equipment (5-year property)on November 16 with a basis of $15,000 and furniture (7-year property)on April 20 with a basis of $11,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 2)(Round final answer to the nearest whole number.)

-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)

-Reid acquired two assets in 2018: computer equipment (5-year property)acquired on August 6ᵗʰ with a basis of $1,000,000 and machinery (7-year property)on November 9th with a basis of $1,000,000.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 -Beth's business purchased only one asset during the current year (a full 12-month tax year).Beth placed in service machinery (7-year property)on December 1 with a basis of $50,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 2)

Which of the following depreciation conventions are not used under MACRS?

Which of the following assets is not eligible for bonus depreciation?

-Flax,LLC purchased only one asset this year.Flax placed in service a computer (5-year property)on January 16 with a basis of $14,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 1)

Jasmine started a new business in the current year.She incurred $10,000 of start-up costs.How much of the start-up costs can be immediately expensed (excluding amounts amortized over 180 months)for the year?

All taxpayers may use the §179 immediate expensing election on certain property.

Roth,LLC purchased only one asset during the current year.Roth placed in service office equipment (7-year property)on August 1ˢᵗ with a basis of $42,500.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Half-Year Convention)(Round final answer to the nearest whole number.)

If a taxpayer places only one asset (a building)in service during the fourth quarter of the year,the mid-quarter convention must be used.

In general,a taxpayer should select longer-lived property for the §179 immediate expensing election.

IN THE TEXT -Columbia LLC only purchased one asset this year.Columbia LLC placed in service on July 9,2018 machinery and equipment (7-year property)with a basis of $2,750,000.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)(Round final answer to the nearest whole number.)

Deirdre's business purchased two assets during the current year (a full 12-month tax year).Deirdre placed in service computer equipment (5-year property)on January 20 with a basis of $15,000 and machinery (7-year property)on September 1 with a basis of $15,000.Calculate the maximum depreciation expense,(ignoring §179 and bonus depreciation).(Use MACRS Half-Year Convention)(Round final answer to the nearest whole number.)

-Crouch LLC placed in service on May 19,2018 machinery and equipment (7-year property)with a basis of $3,200,000.Assume that Crouch has sufficient income to avoid any limitations.Calculate the maximum depreciation expense including §179 expensing (but ignoring bonus depreciation).(Use MACRS Table 1)