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

Caitlyn purchases and places in service property costing $450,000 in 2017.She wants to elect the maximum Sec.179 deduction allowed.The property does not qualify for bonus depreciation.Her business income is $400,000.What is the amount of her allowable Sec.179 deduction and carryover,if any?

In April of 2016,Brandon acquired five-year listed property (not an automobile) for $30,000 and used it 70% for business.No election was made regarding Sec.179 and bonus depreciation was not available.In 2017,his business use of the property dropped to 40%.Which of the following statements is true?

Quattro Enterprises,a calendar-year taxpayer,leases the twentieth floor of a building downtown.Due to employment expansion,it renovated the entire office space layout,spending $600,000 on these leasehold improvements.The office renovation was completed in May.Quattro also spent $510,000 on new computer systems and office furniture and fixtures in May on which the business used its entire Sec.179 allowance for 2017.What is the maximum depreciation deduction available in 2017 for the leasehold improvements?

Arthur uses a Chevrolet Suburban (GVWR 7,500 pounds) 100% for business.He acquired and placed the vehicle in service in his business in January of the current year.The vehicle cost $65,000.The maximum deduction allowed this year is

Under the MACRS system,depreciation rates for real property must always use the mid-month convention in the year of acquisition.

During the year 2017,a calendar-year taxpayer,Marvelous Munchies,a chain of specialty food shops,purchased equipment as follows: Assume the property is all 5-year property,but does not qualify for bonus depreciation.What is the maximum depreciation that may be deducted for the assets this year,2017,assuming Sec.179 expensing is not elected?

If at least 50% of the aggregate basis of all new personal property for the tax year is placed in service during the last three months of the year,the mid-quarter convention is required.

For real property placed in service after 1986,depreciation under the MACRS system is calculated using the

On January 1 of the current year,Dentux Corp.purchases a patent from another corporation for $600,000.The patent has a remaining life of 10 years.The patent is the only asset purchased from that corporation.Also on January 1,Dentux purchases all of the assets of Fenton Corp.Included in the Fenton assets acquired is a patent worth $300,000 that has a 10-year remaining life.What is the allowable amortization deduction on the two patents?

In order for an asset to be depreciated in the year of purchase,it must be placed in service before year's end.

In May 2017,Cassie acquired a machine for $30,000 to use in her business.The machine is classified as 5-year property.Cassie does not expense the property under Sec.179,and the machine is not eligible for bonus depreciation.Cassie's depreciation on the machine this year is

The Section 179 expensing election is available on an annual basis for property purchased during the year.

Why would a taxpayer elect to capitalize and amortize intangible drilling costs (IDCs) rather than expense such costs?

On June 30,2017,Temika purchased office furniture (7-year property) costing $400,000 and computers (5-year property) with a cost of $250,000.She uses Sec.179,but the assets do not qualify for bonus depreciation.Her business income is $790,000 without considering Sec.179.How should she allocate the Sec.179 election in order to maximize her total cost recovery deductions (depreciation and Sec.179) for 2017 ?

On January l,Grace leases and places into service an automobile with a FMV of $38,000.The business use of the automobile is 60%.The "inclusion amount" for the initial year of the lease from the IRS tables is $40.The annual lease payments are $8,000.What are the tax consequences of this lease?

Why would a taxpayer elect to use the alternative depreciation system rather than the MACRS rules?

Stellar Corporation purchased all of the assets of Bellavia Company as of January 1 this year for $1 million.Included in the assets acquired are the following intangible assets: What is Stellar's maximum amortization deduction for the year?

On its tax return,a corporation will use the same depreciation,amortization and depletion methods used in its financial statements issued to shareholders.

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property) for $12,000.He used the van 30% for business.The maximum depreciation deduction for the van is

Everest Corp.acquires a machine (seven-year property) on January 10,2017 at a cost of $2,042,000.Everest makes the election to expense the maximum amount under Sec.179.The property is not eligible for bonus depreciation. a.Assume that the taxable income from trade or business is $1,500,000. (1) What is the amount of the Sec.179 expensing deduction for the current year? (2) What is the amount of the Sec.179 carryover to the next tax year? (3) What is the amount of depreciation allowed? b.Assume instead that the taxable income from trade or business is $400,000. (1) What is the amount of the Sec.179 expensing deduction for the current year? (2) What is the amount of the Sec.179 carryover to the next tax year? (3) What is the amount of depreciation allowed this year?