Question 1

Carlos purchased an apartment building on November 16,2017,for $3,000,000.Determine the cost recovery for 2017.

Accepted Answer

A) $9,630 
B) $11,910 
C) $13,950 
D) $22,740 
E) None of the above 
A) $9,630 
B) $11,910 
C) $13,950 
D) $22,740 
E) None of the above

Question 2

On July 10,2017,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 2017,assuming Ariff's § 179 business income is $110,000.Ariff does not take additional first-year depreciation.

Accepted Answer

A) $2,960 
B) $25,000 
C) $34,000 
D) $70,000 
E) None of the above 
A) $2,960 
B) $25,000 
C) $34,000 
D) $70,000 
E) None of the above

Question 3

Under the MACRS straight-line election for personalty,only the half-year convention is applicable.

Accepted Answer

A) True 
 B)False

Question 4

The cost of a covenant not to complete for 10 years incurred in connection with the acquisition of a business is amortized over 10 years.

Accepted Answer

A) True 
 B)False

Question 5

Rick purchased a uranium interest for $10,000,000 on January 3,2017,when recoverable reserves were estimated at 200,000 units.A total of 10,000 units were extracted in 2017 and 7,000 units were sold in 2017.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 2017.

Accepted Answer

Cost depletion
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Question 6

Diane purchased a factory building on April 15,1993,for $5,000,000.She sells the factory building on February 2,2017.Determine the cost recovery deduction for the year of the sale.

Accepted Answer

A) $16,025 
B) $19,838 
C) $26,458 
D) $158,750 
E) None of the above 
A) $16,025 
B) $19,838 
C) $26,458 
D) $158,750 
E) None of the above

Question 7

The amortization period for $58,000 of startup expenses is 180 months.

Accepted Answer

A) True 
 B)False

Question 8

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 9

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

Accepted Answer

A) True 
 B)False

Question 10

Property which is classified as personalty may be depreciated.

Accepted Answer

A) True 
 B)False

Question 11

Mary purchased a new five-year class asset on March 7,2017.The asset was listed property (not an automobile).It was used 60% for business and the rest of the time for personal use.The asset cost $900,000.Mary made the § 179 election.The income from the business before the § 179 deduction was $600,000.Mary also takes additional first-year depreciation.Determine the total deductions with respect to the asset for 2017.

Accepted Answer

A) $180,000 
B) $378,000 
C) $528,000 
D) $600,000 
E) None of the above 
A) $180,000 
B) $378,000 
C) $528,000 
D) $600,000 
E) None of the above

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Hazel purchased a new business asset (five-year asset) on September 30,2017,at a cost of $100,000.On October 4,2017,Hazel placed the asset in service.This was the only asset Hazel placed in service in 2017.Hazel did not elect § 179 or additional first-year depreciation.On August 20,2018,Hazel sold the asset.Determine the cost recovery for 2018 for the asset.

Accepted Answer

A) $14,250 
B) $19,000 
C) $23,750 
D) $38,000 
E) None of the above 
A) $14,250 
B) $19,000 
C) $23,750 
D) $38,000 
E) None of the above

Question 14

MACRS depreciation is used to compute earnings and profits.

Accepted Answer

A) True 
 B)False

Question 15

During the past two years,through extensive advertising and improved customer relations,Orange Corporation estimated that it had developed customer goodwill worth $500,000.For the current year,determine the amount of goodwill Orange Corporation may amortize.

Accepted Answer

A) $16,667 
B) $26,667 
C) $33,333 
D) $100,000 
E) None of the above 
A) $16,667 
B) $26,667 
C) $33,333 
D) $100,000 
E) None of the above

Question 16

A purchased trademark is a § 197 intangible.

Accepted Answer

A) True 
 B)False

Question 17

The only asset Bill purchased during 2017 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 2017.

Accepted Answer

A) $1,428 
B) $2,499 
C) $26,749 
D) $33,375 
E) None of the above 
A) $1,428 
B) $2,499 
C) $26,749 
D) $33,375 
E) None of the above

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

Accepted Answer

Section 179 expensing cannot b

Question 20

Discuss the tax implications of a seller allocating the selling price to goodwill or a covenant not to compete.

Accepted Answer

Goodwill is a capital asset and any gain

Exam 8: Depreciation, cost Recovery, amortization, and Depletion

Carlos purchased an apartment building on November 16,2017,for $3,000,000.Determine the cost recovery for 2017.

On July 10,2017,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 2017,assuming Ariff's § 179 business income is $110,000.Ariff does not take additional first-year depreciation.

Under the MACRS straight-line election for personalty,only the half-year convention is applicable.

The cost of a covenant not to complete for 10 years incurred in connection with the acquisition of a business is amortized over 10 years.

Diane purchased a factory building on April 15,1993,for $5,000,000.She sells the factory building on February 2,2017.Determine the cost recovery deduction for the year of the sale.

The amortization period for $58,000 of startup expenses is 180 months.

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

Property which is classified as personalty may be depreciated.

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

MACRS depreciation is used to compute earnings and profits.

During the past two years,through extensive advertising and improved customer relations,Orange Corporation estimated that it had developed customer goodwill worth $500,000.For the current year,determine the amount of goodwill Orange Corporation may amortize.

A purchased trademark is a § 197 intangible.

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

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

Discuss the tax implications of a seller allocating the selling price to goodwill or a covenant not to compete.

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

Property Transactions, capital Gains and Losses, sec1231, and 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 Reorganization

Partnerships

S Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters