Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

Tara purchased a machine for $40,000 to be used in her business.The cost recovery allowed and allowable for the three years the machine was used are as follows:   If Tara sells the machine after three years for $15,000, how much gain should she recognize?

Accepted Answer

A) $3,480. 
B) $6,360. 
C) $9,240. 
D) $11,480. 
E) None of the above. 
A) $3,480. 
B) $6,360. 
C) $9,240. 
D) $11,480. 
E) None of the above.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination if the property is placed in service in 2012.

Accepted Answer

Residential realty is property for which

Question 7

Nora purchased a new automobile on July 20, 2012, for $29,000.The car was used 60% for business and 40% for personal use.In 2013, the car was used 30% for business and 70% for personal use. Nora elects not to take additional first-year depreciation. Determine the cost recovery recapture and the cost recovery deduction for 2013.

Accepted Answer

Cost recovery in 201

Question 8

The inclusion amount for a leased automobile is adjusted by a business usage percentage.

Accepted Answer

A) True 
 B)False

Question 9

On July 17, 2012, Kevin places in service a used automobile that cost $25,000.The car is used 80% for business and 20% for personal use.In 2013, he used the automobile 40% for business and 60% for personal use.Determine the cost recovery recapture for 2013.

Accepted Answer

A) $0. 
B) $448. 
C) $2,000. 
D) $2,500. 
E) None of the above. 
A) $0. 
B) $448. 
C) $2,000. 
D) $2,500. 
E) None of the above.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Antiques may be eligible for cost recovery if they are used in a trade or business.

Accepted Answer

A) True 
 B)False

Question 12

On May 2, 2012, Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 60% for business and 40% for personal use. Determine the cost recovery for 2012.Karen wants to maximize her deductions.

Accepted Answer

A) $2,200. 
B) $3,060. 
C) $25,000. 
D) $27,200. 
E) None of the above. 
A) $2,200. 
B) $3,060. 
C) $25,000. 
D) $27,200. 
E) None of the above.

Question 13

The costs of qualified leasehold improvements qualify for additional first-year depreciation.

Accepted Answer

A) True 
 B)False

Question 14

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.

Accepted Answer

A) $2,000. 
B) $3,000. 
C) $6,000. 
D) $12,000. 
E) None of the above. 
A) $2,000. 
B) $3,000. 
C) $6,000. 
D) $12,000. 
E) None of the above.

Question 15

On January 15, 2012, Vern purchased the rights to a mineral interest for $3,500,000.At that time it was estimated that the recoverable units would be 500,000.During the year, 40,000 units were mined and 25,000 units were sold for $800,000.Vern incurred expenses during 2012 of $500,000.The percentage depletion rate is 22%.Determine Vern's depletion deduction for 2012.

Accepted Answer

A) $150,000. 
B) $175,000. 
C) $176,000. 
D) $200,000. 
E) $250,000. 
A) $150,000. 
B) $175,000. 
C) $176,000. 
D) $200,000. 
E) $250,000.

Question 16

Once the more-than-50% business usage test is passed for listed property, it does matter if the business usage for the property drops to 50% or less during the recovery period.

Accepted Answer

A) True 
 B)False

Question 17

Property used for the production of income is not eligible for § 179 expensing.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Polly purchased a new hotel on July 20, 2012, for $6,000,000.On January 20, 2019, the building was sold.Determine the cost recovery deduction for the year of the sale.

Accepted Answer

$6,000,000

Question 20

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.

Accepted Answer

A) $0. 
B) $1,667. 
C) $11,667. 
D) $35,000. 
E) None of the above. 
A) $0. 
B) $1,667. 
C) $11,667. 
D) $35,000. 
E) None of the above.

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

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

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

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

Tara purchased a machine for $40,000 to be used in her business.The cost recovery allowed and allowable for the three years the machine was used are as follows: If Tara sells the machine after three years for $15,000, how much gain should she recognize?

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

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination if the property is placed in service in 2012.

The inclusion amount for a leased automobile is adjusted by a business usage percentage.

On July 17, 2012, Kevin places in service a used automobile that cost $25,000.The car is used 80% for business and 20% for personal use.In 2013, he used the automobile 40% for business and 60% for personal use.Determine the cost recovery recapture for 2013.

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

Antiques may be eligible for cost recovery if they are used in a trade or business.

On May 2, 2012, Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 60% for business and 40% for personal use. Determine the cost recovery for 2012.Karen wants to maximize her deductions.

The costs of qualified leasehold improvements qualify for additional first-year depreciation.

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.

Once the more-than-50% business usage test is passed for listed property, it does matter if the business usage for the property drops to 50% or less during the recovery period.

Property used for the production of income is not eligible for § 179 expensing.

Polly purchased a new hotel on July 20, 2012, for $6,000,000.On January 20, 2019, the building was sold.Determine the cost recovery deduction for the year of the sale.

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.

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