Exam 8: Depreciation, Cost Recovery, Amortization, and Depletion

On June 1, 2012, Norm leases a taxi and places it in service.The lease payments are $1,000 per month.Assuming the dollar amount from the IRS table is $241, determine Norm's inclusion amount.

Rustin bought used 7-year class property on May 15, 2012, for $370,000.Rustin elects § 179 and straight-line cost recovery.Rustin's taxable income would not create a limitation for purposes of the § 179 deduction. Rustin does not take additional first-year depreciation.Determine the write-off Rustin can take in 2012.

On June 1, 2012, Red Corporation purchased an existing business.With respect to the acquired assets of the business, Red allocated $300,000 of the purchase price to a patent.The patent will expire in 20 years.Determine the total amount that Red may amortize for 2012 for the patent.

Pat purchased a used five-year class asset on March 15, 2012, for $60,000.He did not elect § 179 expensing.Determine the cost recovery deduction for 2012 for earnings and profits purposes.

The statutory dollar cost recovery limits under § 280F do not apply to all automobiles.

On June 1, 2012, James places in service a new automobile that cost $40,000.The car is used 60% for business and 40% for personal use.(Assume this percentage is maintained for the life of the car.) James does take additional first-year depreciation.Determine the cost recovery deduction for 2012.

If 150% declining-balance is used, there is no straight-line switchover.

Under the MACRS straight-line election for personalty, the mid-quarter convention is applicable.

If a new car that is used predominantly in business is placed in service in 2012, the statutory dollar cost recovery limit under § 280F will depend on whether the taxpayer takes MACRS or straight-line depreciation.

The maximum cost recovery method for all personal property under MACRS is 150% declining balance.

On February 15, 2012, Martin signed a 20-year lease on a commercial building. In March 2012, Martin purchased and placed in service new seven-year class assets costing $400,000. In June 2012, Martin paid $200,000 for qualified leasehold real property improvements. Martin desires to take the maximum cost recovery deduction with respect to the assets in 2012. He takes additional first-year depreciation. Assuming taxable income is not a limitation, determine Martin's maximum cost recovery for 2012.

Barry purchased a used business asset (seven-year property) on September 30, 2012, at a cost of $200,000.This is the only asset he purchased during the year.Barry did not elect to expense any of the asset under § 179, nor did he elect straight-line cost recovery.Barry sold the asset on July 17, 2013.Determine the cost recovery deduction for 2013.

On July 10, 2012, Ariff places in service a new sports utility vehicle that cost $70,000 and weighed 6,300 pounds.The SUV is used 100% for business.Determine Ariff's maximum deduction for 2012, assuming Ariff's § 179 business income is $110,000. Ariff does not take additional first-year depreciation.

On August 20, 2011, May signed a 10-year lease on a building for her business.On November 28, 2012, May paid $80,000 for a qualified leasehold improvement to the building.She takes additional first-year depreciation.What is May's cost recovery deduction for the improvement in 2012?

The key date for calculating cost recovery is the date the asset is placed in service.

If startup expenses total $53,000 in 2012, $51,000 is amortized over 180 months.

In 2012, Marci is considering starting a new business. Marci had the following costs associated with this venture: Marci started the new business on October 1, 2012. Determine the deduction for Marci's startup costs for 2012.

The § 179 deduction can exceed $139,000 in 2012 if the taxpayer had a § 179 amount which exceeded the taxable income limitation in the prior year.

Diane purchased a factory building on November 15, 1993, for $5,000,000.She sells the factory building on February 2, 2012.Determine the cost recovery deduction for the year of the sale.

Sid bought a new $410,000 seven-year class asset on August 2, 2012.On December 2, 2012, he purchased $160,000 of used five-year class assets. Sid does take additional first-year depreciation if available.If Sid elects § 179, what is the maximum write-off for these purchases for 2012?