Question 1

If startup expenses total $53,000,$51,000 of those costs are amortized over 180 months.

Accepted Answer

A) True 
 B)False

Question 2

On July 15,2017,Mavis paid $275,000 for improvements on a commercial building she owns.Determine the maximum total cost recovery from the improvements in 2017.

Accepted Answer

The answer of On July 15,2017,Mavis paid $275,000 for improvements...

Question 3

On March 1,2017,Lana leases and places in service a passenger automobile.The lease will run for five years and the payments are $500 per month.During 2017,she uses her car 60% for business and 40% for personal activities.Assuming the dollar amount from the IRS table for auto leases is $70,determine Lana's gross income attributable to the lease.

Accepted Answer

A) $0 
B) $35 
C) $59 
D) $70 
E) None of the above 
A) $0 
B) $35 
C) $59 
D) $70 
E) None of the above

Question 4

Augie purchased one new asset during the year (five-year property) on November 10,2017,at a cost of $660,000.She would like to use the § 179 election and will also take additional first-year depreciation.The income from the business before the cost recovery deduction and the § 179 deduction was $600,000.Determine the total cost recovery deduction with respect to the asset for 2017.

Accepted Answer

A) $30,500 
B) $320,250 
C) $510,000 
D) $588,750 
E) None of the above 
A) $30,500 
B) $320,250 
C) $510,000 
D) $588,750 
E) None of the above

Question 5

For personal property placed in service in 2017,the § 179 maximum deduction is limited to $510,000.

Accepted Answer

A) True 
 B)False

Question 6

Intangible drilling costs must be capitalized and recovered through depletion.

Accepted Answer

A) True 
 B)False

Question 7

Cora purchased a hotel building on May 17,2017,for $3,000,000.Determine the cost recovery deduction for 2018.

Accepted Answer

A) $48,150 
B) $59,520 
C) $69,000 
D) $76,920 
E) None of the above 
A) $48,150 
B) $59,520 
C) $69,000 
D) $76,920 
E) None of the above

Question 8

Audra acquires the following new five-year class property in 2017:
Audra elects § 179 treatment for Asset C.Audra's taxable income from her business would not create a limitation for purposes of the § 179 deduction.Audra claims the full available additional first-year depreciation deduction.Determine her total cost recovery deduction (including the § 179 deduction) for the year.

Accepted Answer

As detailed below,the § 179 deduction is

Question 9

On May 30,2016,Jane purchased a factory building to use for her business.In August 2017,Jane paid $300,000 for improvements to the building.Determine Jane's total deduction with respect to the building improvements for 2017.

Accepted Answer

A) $2,889 
B) $4,173 
C) $4,815 
D) $25,000 
E) None of the above 
A) $2,889 
B) $4,173 
C) $4,815 
D) $25,000 
E) None of the above

Question 10

On June 1,2017,Irene places in service a new automobile that cost $21,000.The car is used 70% for business and 30% for personal use.(Assume this percentage is maintained for the life of the car.) She does not take additional first-year depreciation.Determine the cost recovery deduction for 2018.

Accepted Answer

A) $3,160 
B) $3,290 
C) $3,570 
D) $6,720 
E) None of the above 
A) $3,160 
B) $3,290 
C) $3,570 
D) $6,720 
E) None of the above

Question 11

Alice purchased office furniture on September 20,2016,for $100,000.On October 10,2016,she purchased business computers for $80,000.Alice placed all of the assets in service on January 15,2017.Alice did not elect to expense any of the assets under § 179,did not elect straight-line cost recovery,and did not take additional first-year depreciation.Determine the cost recovery deduction for the business assets for 2017.
​

Accepted Answer

A) $6,426 
B) $14,710 
C) $25,722 
D) $30,290 
E) None of the above 
A) $6,426 
B) $14,710 
C) $25,722 
D) $30,290 
E) None of the above

Question 12

Bonnie purchased a new business asset (five-year property) on March 10,2017,at a cost of $30,000.She also purchased a new business asset (seven-year property) on November 20,2017,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.Bonnie takes additional first-year depreciation.Determine the cost recovery deduction for 2017 for these assets.

Accepted Answer

A) $5,858 
B) $7,464 
C) $9,586 
D) $19,429 
E) None of the above 
A) $5,858 
B) $7,464 
C) $9,586 
D) $19,429 
E) None of the above

Question 13

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 placed in service in the second quarter will be allowed 7.5 months of cost recovery.

Accepted Answer

A) True 
 B)False

Question 14

If an automobile is placed in service in 2017,the limitation for cost recovery in 2019 will be based on the cost recovery limits for the year 2017.

Accepted Answer

A) True 
 B)False

Question 15

Tom purchased and placed in service used office furniture on January 3,2017,for $40,000.Tom's accountant depreciated the furniture using straight-line depreciation over 10 years for financial reporting purposes.The accountant also used the same depreciation amounts when filing Tom's income tax returns.On January 10,2022,Tom sold the furniture.Determine the tax basis of the furniture at the time of the sale.

Accepted Answer

The cost of the asset must be

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Goodwill associated with the acquisition of a business cannot be amortized.

Accepted Answer

A) True 
 B)False

Question 18

Discuss the requirements in order for startup expenditures to be amortized under § 195.

Accepted Answer

The expenditures mus

Question 19

Polly purchased a new hotel on July 20,2017,for $6,000,000.On January 20,2024,the building was sold.Determine the cost recovery deduction for the year of the sale.

Accepted Answer

$6,000,000

Question 20

The "luxury auto" cost recovery limits change if mid-quarter cost recovery is used.

Accepted Answer

A) True 
 B)False

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

If startup expenses total $53,000,$51,000 of those costs are amortized over 180 months.

On July 15,2017,Mavis paid $275,000 for improvements on a commercial building she owns.Determine the maximum total cost recovery from the improvements in 2017.

For personal property placed in service in 2017,the § 179 maximum deduction is limited to $510,000.

Intangible drilling costs must be capitalized and recovered through depletion.

Cora purchased a hotel building on May 17,2017,for $3,000,000.Determine the cost recovery deduction for 2018.

On May 30,2016,Jane purchased a factory building to use for her business.In August 2017,Jane paid $300,000 for improvements to the building.Determine Jane's total deduction with respect to the building improvements for 2017.

On June 1,2017,Irene places in service a new automobile that cost $21,000.The car is used 70% for business and 30% for personal use.(Assume this percentage is maintained for the life of the car.) She does not take additional first-year depreciation.Determine the cost recovery deduction for 2018.

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 placed in service in the second quarter will be allowed 7.5 months of cost recovery.

If an automobile is placed in service in 2017,the limitation for cost recovery in 2019 will be based on the cost recovery limits for the year 2017.

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

Goodwill associated with the acquisition of a business cannot be amortized.

Discuss the requirements in order for startup expenditures to be amortized under § 195.

Polly purchased a new hotel on July 20,2017,for $6,000,000.On January 20,2024,the building was sold.Determine the cost recovery deduction for the year of the sale.

The "luxury auto" cost recovery limits change if mid-quarter cost recovery is used.

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

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