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

Under the MACRS system,automobiles and computers are classified as seven-year property.

A taxpayer owns an economic interest in an oil and gas property.She is allowed to deduct the smaller of cost depletion or percentage depletion.

In January of 2017,Brett purchased a Porsche for $100,000 to be used in his business.Brett drove the car 83 percent of the time for business.What is the maximum amount that Brett may deduct in 2017?

Galaxy Corporation purchases specialty software from a software development firm for use in its business as of January 1 of the current year at a cost of $90,000.No hardware was acquired.How much of the cost can Galaxy deduct this year?

Under the MACRS rules,salvage value is not considered in the computation of the cost-recovery or depreciation amount.

Taxpayers are entitled to a depletion deduction if they have an economic interest in the natural resource property.