Exam 10: Depreciation, cost Recovery, amortization, and Depletion

William purchases nonresidential real property costing $300,000 and places it in service in March 2016.What is Lincoln's 2017 depreciation on the property?

Intangible assets are subject to MACRS depreciation.

On August 11,2017,Nancy acquired and placed into service residential rental property,which cost $430,000; the cost of the land has been excluded.Nancy annually elects the maximum allowed Sec.179 deduction.The total depreciation for the year is (rounded)

In August 2017,Tianshu acquires and places into service 7-year business equipment (tangible personal property qualifying under Sec.179,but not for bonus depreciation) for $70,000.This is the only asset that she purchased during the year; her taxable income from her trade or business is $23,000.She decides to limit her Sec.179 election to the maximum amount currently deductible in her business for the current year.What is her maximum cost recovery (Sec.179 and depreciation) deduction for 2017?

Any Section 179 deduction that is not allowed currently due to the taxable income limitation may be carried over and deducted in future years.

The basis of an asset must be reduced by the depreciation allowable.

On January 1,2017,Charlie Corporation acquires all of the net assets of Rocky Corporation for $2,000,000.The following intangible assets are included in the purchase agreement: What is the total amount of amortization allowed in 2017?

Section 179 allows taxpayers to immediately expense up to $510,000 for 2017 of the cost of real and personal property placed into service in a trade or business,subject to limitations.

Richards Corporation reports taxable income exceeding $1.5 million per year.In 2017,it acquired and placed in service $1,610,000 of new equipment.The equipment,its only property addition this year,is five-year property and was shipped directly from the factory.What is the maximum tax deduction it can take this year with respect to this new equipment?

Sec.179 tax benefits are recaptured if at any time an asset is converted to personal use.

In April 2017,Emma acquired a machine for $60,000 for use in her business.The machine is classified as 7-year property.Emma does not expense the asset under Sec.179,and it is not eligible for bonus depreciation.Emma's depreciation on the machine this year is

The client is a corporation which uses high-tech equipment to manufacture its product.Because of the high level of wear and tear due to long production runs and frequent technology changes,the client usually replaces the equipment every two years.According to IRS guidance,the MACRS life of the equipment is five years.In order to accelerate depreciation deductions,which tax depreciation option should the client elect?

If personal-use property is converted to trade or business use,the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion.

Residential rental property is defined as property from which more than 80% of the gross rental income is rental income from dwelling units.

Discuss the options available regarding treatment of an amount paid in excess of the FMV of an acquired company's net assets in a business combination.

Jack purchases land which he plans on developing as a golf course.The land costs $20,000,000 and the cost of clearing the land,earthmoving,constructing hazards,bunkers and greens,and installing irrigation systems will cost an additional $6,000,000.What tax issues should Jack consider?

Kenrick is an employee of the Theta Corp.sales department.He uses his automobile 75% for making sales calls.He can deduct depreciation on his auto by reporting on Form 4562 (Depreciation and Amortization).

All of the following are true with regard to the alternative depreciation system except

Expenditures that enlarge a building,any elevator or escalator,any structural component that benefits a common area or the internal structural framework are not considered qualified leasehold improvement property.

If the business use of listed property is 50% or less of the total usage,the alternative depreciation system must be used.