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

White Company acquires a new machine (seven-year property) on January 10, 2012, at a cost of $600,000.White makes the election to expense the maximum amount under § 179.No election is made to use the straight-line method. White does take additional first-year depreciation.Determine the total deductions in calculating taxable income related to the machine for 2012 assuming White has taxable income of $800,000.

Rod paid $950,000 for a new warehouse on April 14, 2012.He sold the warehouse on September 29, 2017.Determine the cost recovery deduction for 2012 and 2017.

Which of the following assets would be subject to cost recovery?

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?

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.

Under the alternative depreciation system (ADS), the half-year convention must be used for personalty.

An election to use straight-line under ADS is made on an asset-by-asset basis for property other than eligible real estate.

On March 1, 2012, Lana leases and places in service a passenger automobile.The lease will run for five years and the payments are $500 per month.During 2012, she uses her car 40% for business and 60% for personal activities.Assuming the dollar amount from the IRS table is $110, determine Lana's deduction for the lease payments.

If a used $15,000 automobile used 100% for business in the first year (2012) fails the 50% business usage test in the second year, no cost recovery will be recaptured.

The amortization period in 2012 for $4,000 of startup expenses if no election is made is 180 months.

Carlos purchased an apartment building on November 16, 2012, for $3,000,000.Determine the cost recovery for 2012.

The cost recovery period for new farm equipment placed in service during 2012 is seven years.

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

Under MACRS, if the mid-quarter convention is applicable, all property sold is treated as being sold at the mid-point of the quarter in which it is placed in service.

Discuss the beneficial tax consequences of an SUV not being classified as a passenger automobile.

Bonnie purchased a new business asset (five-year property) on March 10, 2012, at a cost of $30,000.She also purchased a new business asset (seven-year property) on November 20, 2012, at a cost of $13,000.Bonnie did not elect to expense either of the assets under § 179, nor did she elect straight-line cost recovery. Bonnies takes additional first-year depreciation. Determine the cost recovery deduction for 2012 for these assets.

On July 15, 2012, Mavis paid $275,000 for exterior leasehold improvements on a commercial building she was leasing. Determine the total cost recovery from the improvements in 2012. Mavis elected not to take additional first-year depreciation.

The only asset Bill purchased during 2012 was a new seven-year class asset.The asset, which was listed property, was acquired on June 17 at a cost of $50,000.The asset was used 40% for business, 30% for the production of income, and the rest of the time for personal use.Bill always elects to expense the maximum amount under § 179 whenever it is applicable.The net income from the business before the § 179 deduction is $100,000.Determine Bill's maximum deduction with respect to the property for 2012.

Residential rental real estate includes property where 80% or more of the net rental revenues are from nontransient dwelling units.

Alice purchased office furniture on September 20, 2012, for $100,000.On October 10, she purchased business computers for $80,000.Alice did not elect to expense any of the assets under § 179, nor did she elect straight-line cost recovery. She did not take additional first-year depreciation. Determine the cost recovery deduction for the business assets for 2012.