Exam 8: Depreciation and Sale of Business Property

What is the maximum depreciation expense deduction for Year 2 (2019)for a passenger automobile, used 100 percent for qualified business use, placed in service on June 15, 2018 and costing $16,000 (the election to expense is not made and no bonus depreciation was taken)?

An asset (not an automobile)put in service in June 2018 has a depreciable basis of $535,000 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?

On July 15, 2018, H.P.purchases a personal computer for his home.The computer cost $4,000.H.P.uses the computer 60 percent of the time in his business, 15 percent of the time for managing his investments and the remaining 25 percent of the time for various personal uses.Calculate H.P.'s maximum depreciation deduction for 2018 for the computer, assuming he does not make the election to expense or take bonus depreciation.

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

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.

Which of the following assets is not a Section 1231 asset?

Which one of the following is true about Modified Accelerated Cost Recovery System (MACRS)?

On January 1, 2018, 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 2018 tax return for the purchased goodwill?

Calculate the following amounts: a.The first year of depreciation on a residential rental building costing $100,000, purchased on November 30. b.The first year of depreciation on an auto used 100 percent in business, costing $30,000, purchased in May 2018.(No Section 179 or bonus depreciation). c.The second year of depreciation on a computer used exclusively for business, costing $7,000, purchased May 2017. d.The third year of depreciation on business furniture costing $1,000, purchased in July 2016, using the half-year convention and accelerated depreciation.

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.

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?

Dan acquired rental property in June 2008 for $370,000 and sold it in October, 2018.$40,000 in straight-line depreciation has been taken on the house.A run-up in housing prices allowed him to sell the house for $575,000.In the year of sale, Dan received $175,000 when the buyer sold some investments, an additional $200,000 when the buyer closed a loan from the bank, and took a $200,000 note from the buyer, payable on the anniversary of the sale date in 10 installments of $20,000 each plus interest on the unpaid balance.Using the installment method, calculate his taxable gain in the year of sale.

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.

Ben purchased an apartment building about 10 years ago, for $200,000.The building has been depreciated over the appropriate recovery period using the straight-line method.In the current year, the building was sold for $220,000, when the accumulated depreciation was $62,500.Ben is in the 32% tax bracket; on his current year tax return, he should report:

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

In calculating depreciation:

The maximum annual Section 179 immediate expensing deduction in 2018 is $1,000,000.

An asset (not an automobile)put in service in June 2018 has a depreciable basis of $35,000 and 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 made, what is the maximum amount of cost that can be deducted in 2018 (assume no income limitation)?

Scott purchases a small business from Lew on July 1, 2018.He paid the following amounts for the business: Land \1 00,000 Commercial building 200,000 Furniture and equipment 78,500 Going-concern value 50,000 Workforce in place 29,500 Total a.How much of the $458,000 purchase price is for Section 197 intangible assets? b.What amount can Scott deduct on his 2018 tax return as Section 197 intangible amortization?

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, no bonus depreciation, an election to expense under Section 179, and taxable income after all deductions except Section 179 of $5,000, what is the amount of Section 179 immediate expensing?