Question 1

Assuming a taxpayer has no other gains or losses for the year, a loss from the theft of a Section 1231 asset is treated as a capital loss.

Accepted Answer

A) True 
 B)False

Question 2

Lorreta has a manufacturing business.In the current year, her storage building is completely destroyed by fire and she receives $315,000 from her insurance company.She purchased the building for $300,000 20 years ago and has claimed depreciation of $85,000 using the straight-line method.In the following year, she purchases a new storage building at a cost of $295,000.
a.Calculate Lorreta's realized gain or loss.
b.Assuming Lorreta makes an election under the involuntary conversion provision, calculate Lorreta's recognized gain or loss?
c.Assuming Lorreta makes an election under the involuntary conversion provision, what is Lorreta's basis in the new building?

Accepted Answer

a.$100,000 gain realized = $315,000 − ($

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 − ($11

Question 4

ABC Corp bought a production machine on January 1, 2016 for $31,250.The company did not elect Section 179 expensing and elected out of claiming bonus depreciation in 2016, and is depreciating the machine using the MACRS accelerated depreciation tables for 5-year property.What is the 2018 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 5

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 6

Which of the following is true about the MACRS depreciation system?

Accepted Answer

A) No salvage value is used before depreciation percentages are applied to depreciable real estate. 
B) Residential rental buildings are depreciated straight-line over 20 years. 
C) Commercial real estate buildings are depreciated over 39 years using accelerated depreciation. 
D) No matter when equipment is purchased during the month, it is considered to have been purchased mid-month for MACRS depreciation purposes. 
A) No salvage value is used before depreciation percentages are applied to depreciable real estate. 
B) Residential rental buildings are depreciated straight-line over 20 years. 
C) Commercial real estate buildings are depreciated over 39 years using accelerated depreciation. 
D) No matter when equipment is purchased during the month, it is considered to have been purchased mid-month for MACRS depreciation purposes.

Question 7

Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $2,500,000 annually.

Accepted Answer

A) True 
 B)False

Question 8

If land declines in value, it may be depreciated for tax purposes.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Steve Corp bought a $600,000 apartment building in June of 2017.Of the purchase price, $104,950 is allocated to the value of the land.What is the maximum amount of depreciation that the company can claim in 2018 (Year 2)for the building?

Accepted Answer

A) $9,752 
B) $18,000 
C) $25,000 under the election to expense business property 
D) $21,816 
E) You cannot depreciate property costing over $500,000 
A) $9,752 
B) $18,000 
C) $25,000 under the election to expense business property 
D) $21,816 
E) You cannot depreciate property costing over $500,000

Question 11

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 12

In the current year, Helen sold Section 1245 property for $6,000.The property cost $26,000 when it was purchased 5 years ago.The depreciation claimed on the property was $24,000.
a.Calculate the adjusted basis of the property.
b.Calculate the amount of ordinary income under Section 1245.
c.Calculate the Section 1231 gain.

Accepted Answer

a.$2,000 = $26,000 − $24,000
b

Question 13

A taxpayer places a $50,000 5-year recovery period asset in service in 2018.This is the only asset placed in service in 2018.Assuming half-year convention, bonus depreciation, and taxable income before cost recovery of $5,000, what is the amount of cost recovery in 2018?

Accepted Answer

A) $0 
B) $5,000 
C) $25,000 
D) $30,000 
E) $50,000 
A) $0 
B) $5,000 
C) $25,000 
D) $30,000 
E) $50,000

Question 14

An asset (not an automobile)placed in service in June 2018 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 2018?

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

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 17

During the current year, Ethel exchanges a business land for different business land in a like-kind exchange.Ethel's adjusted basis in the land given up is $7,000, and she receives a land worth $13,000 plus $3,000 cash.
a.Calculate the amount of gain realized by Ethel on the exchange.
b.Calculate the amount of the gain that must be recognized by Ethel on the transaction.
c.Calculate Ethel's basis in the new land.

Accepted Answer

a.$9,000 = $13,000 + $3,000 −

Question 18

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

Accepted Answer

No.For tax purposes, the term depreciati

Question 19

Which one of the following is true about Section 1231 assets?

Accepted Answer

A) Section 1231 assets are treated like capital assets when they produce losses on sale. 
B) Business property held 1 year or less is considered a Section 1231 asset. 
C) Section 1231 assets include company stock. 
D) Section 1231 asset losses must be netted against 1231 asset gains before tax treatment is determined. 
E) All of the above are false. 
A) Section 1231 assets are treated like capital assets when they produce losses on sale. 
B) Business property held 1 year or less is considered a Section 1231 asset. 
C) Section 1231 assets include company stock. 
D) Section 1231 asset losses must be netted against 1231 asset gains before tax treatment is determined. 
E) All of the above are false.

Question 20

A net long-term gain from the theft of a Section 1231 asset is treated as a Section 1231 gain.

Accepted Answer

A) True 
 B)False

Assuming a taxpayer has no other gains or losses for the year, a loss from the theft of a Section 1231 asset is treated as a capital loss.

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

Which of the following is true about the MACRS depreciation system?

Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $2,500,000 annually.

If land declines in value, it may be depreciated for tax purposes.

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

Steve Corp bought a $600,000 apartment building in June of 2017.Of the purchase price, $104,950 is allocated to the value of the land.What is the maximum amount of depreciation that the company can claim in 2018 (Year 2)for the building?

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?

A taxpayer places a $50,000 5-year recovery period asset in service in 2018.This is the only asset placed in service in 2018.Assuming half-year convention, bonus depreciation, and taxable income before cost recovery of $5,000, what is the amount of cost recovery in 2018?

An asset (not an automobile)placed in service in June 2018 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 2018?

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

197 intangibles:

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

Which one of the following is true about Section 1231 assets?

A net long-term gain from the theft of a Section 1231 asset is treated as a Section 1231 gain.

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 1

Additional Income Part 2

Deductions and Adjustments to Income

Accounting Methods and 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

Assuming a taxpayer has no other gains or losses for the year, a loss from the theft of a Section 1231 asset is treated as a capital loss.

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

Which of the following is true about the MACRS depreciation system?

Taxpayers may expense the cost of depreciable personal property placed in service during the year and used in a trade or business in an amount up to a maximum of $2,500,000 annually.

If land declines in value, it may be depreciated for tax purposes.

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

Steve Corp bought a $600,000 apartment building in June of 2017.Of the purchase price, $104,950 is allocated to the value of the land.What is the maximum amount of depreciation that the company can claim in 2018 (Year 2)for the building?

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?

A taxpayer places a $50,000 5-year recovery period asset in service in 2018.This is the only asset placed in service in 2018.Assuming half-year convention, bonus depreciation, and taxable income before cost recovery of $5,000, what is the amount of cost recovery in 2018?

An asset (not an automobile)placed in service in June 2018 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 2018?

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

197 intangibles:

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

Which one of the following is true about Section 1231 assets?

A net long-term gain from the theft of a Section 1231 asset is treated as a Section 1231 gain.

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income Part 1

Additional Income Part 2

Deductions and Adjustments to Income

Accounting Methods and Taxes

Tax Credits

Payroll, Estimated Payments, and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters