Question 1

Land improvements are generally not eligible for cost recovery.

Accepted Answer

A) True 
 B)False

Question 2

In 2011, Gail had a § 179 deduction carryover of $25,000.In 2012, she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2012 is $142,000.Determine Gail's § 179 deduction for 2012.

Accepted Answer

A) $25,000. 
B) $115,000. 
C) $130,000. 
D) $140,000. 
E) None of the above. 
A) $25,000. 
B) $115,000. 
C) $130,000. 
D) $140,000. 
E) None of the above.

Question 3

On May 15, 2012, Brent purchased new farm equipment for $120,000.Brent used the equipment in connection with his farming business. Brent does not elect to expense assets under § 179. Brent does not take additional first-year depreciation.Determine the cost recovery deduction for 2012.

Accepted Answer

A) $12,852. 
B) $18,000. 
C) $24,000. 
D) $30,000. 
E) None of the above. 
A) $12,852. 
B) $18,000. 
C) $24,000. 
D) $30,000. 
E) None of the above.

Question 4

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

Accepted Answer

The purpose of the inclusion a

Question 5

Percentage depletion enables the taxpayer to recover more than the cost of an asset.

Accepted Answer

A) True 
 B)False

Question 6

If an automobile is placed in service in 2012, the limitation for cost recovery in 2014 will be based on the cost recovery limits for the year 2012.

Accepted Answer

A) True 
 B)False

Question 7

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.

Accepted Answer

A) $1,776. 
B) $1,836. 
C) $6,636. 
D) $8,000. 
E) None of the above. 
A) $1,776. 
B) $1,836. 
C) $6,636. 
D) $8,000. 
E) None of the above.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

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.

Accepted Answer

The answer of In 2012, Marci is considering starting a...

Question 11

MACRS depreciation is used to compute earnings and profits.

Accepted Answer

A) True 
 B)False

Question 12

All personal property placed in service in 2012 and used in a trade or business qualifies for additional first-year depreciation.

Accepted Answer

A) True 
 B)False

Question 13

On June 1 of the current year, Tab converted a machine from personal use to rental property.At the time of the conversion, the machine was worth $90,000.Five years ago Tab purchased the machine for $120,000.The machine is still encumbered by a $50,000 mortgage.What is the basis of the machine for cost recovery?

Accepted Answer

A) $70,000. 
B) $90,000. 
C) $120,000. 
D) $140,000. 
E) None of the above. 
A) $70,000. 
B) $90,000. 
C) $120,000. 
D) $140,000. 
E) None of the above.

Question 14

Hazel purchased a new business asset (five-year asset) on September 30, 2012, at a cost of $100,000. On October 4, 2012, Hazel placed the asset in service. This was the only asset Hazel placed in service in 2012. The only election with respect to the asset was not to take § 179. On August 20, 2013, Hazel sold the asset. Determine the cost recovery for 2013 for the asset.

Accepted Answer

A) $9,600. 
B) $11,875. 
C) $23,750. 
D) $38,000. 
E) None of the above. 
A) $9,600. 
B) $11,875. 
C) $23,750. 
D) $38,000. 
E) None of the above.

Question 15

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 16

On May 30, 2012, Jane signed a 20-year lease on a factory building to use for her business. The lease begins on June 1, 2012. In August 2012, Jane paid $300,000 for qualified leasehold improvements to the building. Jane takes additional first-year depreciation. Determine Jane's total deduction with respect to the leasehold improvements for 2012.

Accepted Answer

A) $2,890. 
B) $150,000. 
C) $151,445. 
D) $300,000. 
E) None of the above. 
A) $2,890. 
B) $150,000. 
C) $151,445. 
D) $300,000. 
E) None of the above.

Question 17

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 18

All listed property is subject to the substantiation requirements of § 274.

Accepted Answer

A) True 
 B)False

Question 19

Bhaskar purchased a new factory building on September 2, 2012, for $2,000,000.He elected the alternative depreciation system (ADS).Determine the cost recovery deduction for 2013.

Accepted Answer

A) $15,000. 
B) $18,000. 
C) $22,000. 
D) $50,000. 
E) None of the above. 
A) $15,000. 
B) $18,000. 
C) $22,000. 
D) $50,000. 
E) None of the above.

Question 20

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.

Accepted Answer

A) $0. 
B) $241. 
C) $907. 
D) $1,687. 
E) None of the above. 
A) $0. 
B) $241. 
C) $907. 
D) $1,687. 
E) None of the above.

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

Land improvements are generally not eligible for cost recovery.

In 2011, Gail had a § 179 deduction carryover of $25,000.In 2012, she elected § 179 for an asset acquired at a cost of $115,000.Gail's § 179 business income limitation for 2012 is $142,000.Determine Gail's § 179 deduction for 2012.

On May 15, 2012, Brent purchased new farm equipment for $120,000.Brent used the equipment in connection with his farming business. Brent does not elect to expense assets under § 179. Brent does not take additional first-year depreciation.Determine the cost recovery deduction for 2012.

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

Percentage depletion enables the taxpayer to recover more than the cost of an asset.

If an automobile is placed in service in 2012, the limitation for cost recovery in 2014 will be based on the cost recovery limits for the year 2012.

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.

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

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.

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.

MACRS depreciation is used to compute earnings and profits.

All personal property placed in service in 2012 and used in a trade or business qualifies for additional first-year depreciation.

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.

All listed property is subject to the substantiation requirements of § 274.

Bhaskar purchased a new factory building on September 2, 2012, for $2,000,000.He elected the alternative depreciation system (ADS).Determine the cost recovery deduction for 2013.

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.

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

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