Question 1

The statutory dollar cost recovery limits under § 280F for passenger automobiles still apply if mid-quarter cost recovery is used.

Accepted Answer

A) True 
 B)False

Question 2

George purchases used seven-year class property at a cost of $200,000 on April 20, 2012.Determine George's cost recovery deduction for 2012 for alternative minimum tax purposes, assuming George does not elect § 179.

Accepted Answer

A) $2,500. 
B) $10,000. 
C) $14,280. 
D) $28,580. 
E) None of the above. 
A) $2,500. 
B) $10,000. 
C) $14,280. 
D) $28,580. 
E) None of the above.

Question 3

The concept of depreciation assumes that the asset has a determinable useful life.

Accepted Answer

A) True 
 B)False

Question 4

Discuss the reason for the inclusion amount with respect to leased automobiles.

Accepted Answer

The purpose of the inclusion a

Question 5

On June 1, 2012, Gabriella purchased a computer and peripheral equipment (five-year property) for $25,000.She used the assets 40% for business, 50% for the production of income, and 10% for personal use.These are the only assets Gabriella purchased during the current year.Determine her total cost recovery deduction for the current year.

Accepted Answer

A computer and peripheral equipment are

Question 6

If more than 40% of the value of property, other than real property, is placed in service during the last quarter, all of the property will be allowed 1.5 months of cost recovery.

Accepted Answer

A) True 
 B)False

Question 7

Tan Company acquires a new machine (ten-year property) on January 15, 2012, at a cost of $200,000.Tan also acquires another new machine (seven-year property) on November 5, 2012, at a cost of $40,000.No election is made to use the straight-line method.The company does not make the § 179 election. Tan takes additional first-year depreciation.Determine the total deductions in calculating taxable income related to the machines for 2012.

Accepted Answer

A) $24,000. 
B) $25,716. 
C) $102,000. 
D) $132,858. 
E) None of the above. 
A) $24,000. 
B) $25,716. 
C) $102,000. 
D) $132,858. 
E) None of the above.

Question 8

If a taxpayer uses regular MACRS for all property, an alternative minimum tax adjustment is made with respect to the depreciation on all property, regardless of the class life.

Accepted Answer

A) True 
 B)False

Question 9

When lessor owned leasehold improvements are abandoned because of the termination of the lease, a loss can be taken for the unrecovered basis.

Accepted Answer

A) True 
 B)False

Question 10

On February 21, 2012, Joe purchased new farm equipment for $600,000. Joe has made an election to not have the uniform capitalization rules apply to his farming business. He does not take additional first-year depreciation.If Joe elects § 179, what is the maximum write-off for this purchase for 2012?

Accepted Answer

The answer of On February 21, 2012, Joe purchased new...

Question 11

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

Accepted Answer

A) True 
 B)False

Question 12

On April 15, 2012, Sam placed in service a storage facility (a single-purpose agricultural structure) costing $80,000. Sam also purchased and planted fruit trees costing $40,000. Sam does not elect to expense any of the acquisitions under § 179. Sam elected not to take additional first-year depreciation. Determine Sam's cost recovery from these two items for 2012.

Accepted Answer

The answer of On April 15, 2012, Sam placed in...

Question 13

Rick purchased a uranium interest for $10,000,000 on January 3, 2012, when recoverable reserves were estimated at 200,000 units.A total of 10,000 units were extracted in 2012 and 7,000 units were sold in 2012.Gross income from the property was $2,800,000 and taxable income without the allowance for depletion was $1,000,000.Determine the depletion deduction for 2012.

Accepted Answer

Cost depletion
Percentage depl

Question 14

Doug purchased a new factory building on January 15, 1988, for $400,000.On March 1, 2012, the building was sold.Determine the cost recovery deduction for the year of the sale assuming he did not use the MACRS straight-line method.

Accepted Answer

A) $0. 
B) $1,587. 
C) $2,645. 
D) $12,696. 
E) None of the above. 
A) $0. 
B) $1,587. 
C) $2,645. 
D) $12,696. 
E) None of the above.

Question 15

A purchased trademark is a § 197 intangible.

Accepted Answer

A) True 
 B)False

Question 16

On June 1, 2012, Sam purchased new farm machinery for $150,000.Sam used the machinery in connection with his farming business.Sam does not elect to expense assets under § 179.Sam has, however, made an election to not have the uniform capitalization rules apply to the farming business. Sam does not take additional first-year depreciation. Determine the cost recovery deduction for 2012.

Accepted Answer

A) $5,000. 
B) $7,500. 
C) $10,000. 
D) $12,500. 
E) None of the above. 
A) $5,000. 
B) $7,500. 
C) $10,000. 
D) $12,500. 
E) None of the above.

Question 17

MACRS depreciation is used to compute earnings and profits.

Accepted Answer

A) True 
 B)False

Question 18

Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.

Accepted Answer

A) True 
 B)False

Question 19

On March 3, 2012, Sally purchased and placed in service a building costing $12,000,000. The building has 10 floors. The bottom three floors are rented out to businesses. The top seven floors are residential apartments. The gross rents from the businesses are $60,000 and the gross rents from the apartments are $110,000. Determine Sally's cost recovery for the building in 2012.

Accepted Answer

The gross rents from the apart

Question 20

Intangible drilling costs may be expensed rather than capitalized and written off through depletion.

Accepted Answer

A) True 
 B)False

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

The statutory dollar cost recovery limits under § 280F for passenger automobiles still apply if mid-quarter cost recovery is used.

George purchases used seven-year class property at a cost of $200,000 on April 20, 2012.Determine George's cost recovery deduction for 2012 for alternative minimum tax purposes, assuming George does not elect § 179.

The concept of depreciation assumes that the asset has a determinable useful life.

Discuss the reason for the inclusion amount with respect to leased automobiles.

If more than 40% of the value of property, other than real property, is placed in service during the last quarter, all of the property will be allowed 1.5 months of cost recovery.

If a taxpayer uses regular MACRS for all property, an alternative minimum tax adjustment is made with respect to the depreciation on all property, regardless of the class life.

When lessor owned leasehold improvements are abandoned because of the termination of the lease, a loss can be taken for the unrecovered basis.

Taxable income for purposes of § 179 limited expensing is computed by including the MACRS deduction.

Doug purchased a new factory building on January 15, 1988, for $400,000.On March 1, 2012, the building was sold.Determine the cost recovery deduction for the year of the sale assuming he did not use the MACRS straight-line method.

A purchased trademark is a § 197 intangible.

MACRS depreciation is used to compute earnings and profits.

Cost depletion is determined by multiplying the depletion cost per unit by the number of units sold.

Intangible drilling costs may be expensed rather than capitalized and written off through depletion.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Introduction and Operating Rules

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

Filters