Exam 8: Depreciation and Sale of Business Property

In the current year, Penny exchanges an investment property in Santa Barbara with a mountain view for a lot with an ocean view in a qualifying like-kind exchange.Penny's basis in the land given up is $100,000 and the property has a fair market value of $250,000.In exchange for her property, Penny receives land with a fair market value of $200,000 and cash of $20,000.In addition, the other party to the exchange assumes a mortgage loan on Penny's property of $30,000. a.Calculate Penny's realized gain, if any, on the exchange. b.Calculate Penny's recognized gain, if any, on the exchange. c.Calculate Penny's basis in the property received.

Lanyard purchased office equipment (7-year property)for use in his business.He paid $100,000 for the equipment on July 1, 2018.Lanyard did not purchase any other property during the year.For 2018, his business had net income of $350,000, before depreciation on the office equipment and before considering the election to expense. a.What is the maximum amount that Lanyard can deduct in 2018 under the election to expense? b.What is the total depreciation (regular depreciation and the amount allowed under the election to expense) on the office equipment for 2018, assuming Lanyard uses the accelerated method under MACRS and claims the maximum amount allowable under the election to expense? c.What is Lanyard's total depreciation deduction for 2019 on the 2018 purchase of equipment?

Section 179 immediate expensing can be taken on used property

Jenny constructed a building for use as a residential rental property.The cost of the building was $82,488, and it was placed in service on August 1, 1994.The building has a 27.5-year MACRS life.What is the amount of depreciation on the building for 2018 for tax purposes?

The maximum amount of depreciation including bonus depreciation on a passenger auto placed in service in 2018 is:

During 2018, Travis purchases $13,000 of used manufacturing equipment (7-year property)for use in his business, his only asset purchase that year.Travis has taxable income from his business of $51,000 before any cost recovery.What is the maximum amount that Travis may deduct under the election to expense?$500,000

Tim sells land to Brad for $90,000.Tim originally purchased the land for $50,000.Brad agrees to pay Tim six annual installments of $15,000 each.In year three, Brad makes his third installment of $15,000.How much taxable gain will Tim recognize in year three?

On January 1, 2018, Sandy, a sole proprietor, purchased for use in her business a used production machine (7-year property)at a cost of $4,000.Sandy does not purchase any other property during 2018 and has net income from her business of $80,000.If the standard recovery period table would allow $572 of depreciation expense on the $4,000 of equipment purchased in 2018, what is Sandy's maximum depreciation deduction including the Section 179 election to expense (but not bonus depreciation)for 2018?

During the current year, an office desk used by Pat in his business was completely destroyed by a fire.The adjusted basis of the desk was $900 (original cost of $1,500 less accumulated depreciation of $600).Pat received $500 from his insurance company, but he did not replace the desk. a.What is the amount of Pat's recognized gain or loss (deduction) as a result of the casualty? b.Assuming this is Pat's only casualty gain or loss for the year, what is the nature of the gain or loss?

Casualty gains and losses from business or investment property:

Which one of the following is a Section 197 intangible?

To have the like-kind exchange provisions apply, a taxpayer must make an election.

On May 2, 2018, Scott purchased a commercial building.The cost basis assigned to the building is $600,000.Scott also owns a residential apartment building he purchased on June 15, 2017 with a cost basis of $400,000. a.Calculate Scott's total depreciation deduction for the buildings for 2018, using the Modified Accelerated Cost Recovery System. b.Calculate Scott's total depreciation deduction for the buildings for 2019, using the Modified Accelerated Cost Recovery System.

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

Elmer sold machinery used in his business for $20,000.The machinery originally cost $80,000 and had $45,000 of accumulated depreciation at the time of the sale.It is his only sale this year. a.What is the gain or loss on the sale of the machinery? b.Is the gain or loss treated as capital or ordinary? Explain.

Taxpayers choosing the election to expense:

For each of the following independent situations, indicate with a "Yes" if the asset is listed property.Indicate with a "No" if the asset is not listed property. a.Airplane used 25 percent for business ______ b.Fleet of cabs ______ c.A moving van ______ d.DVD player used 10 percent for business ______ e.A digital camera used 30 percent of the time to list eBay items ______

Residential real estate is currently assigned a 27.5-year cost recovery period under the Modified Accelerated Cost Recovery System.

The tax law imposes restrictions on the depreciation of "listed" property such as automobiles.

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