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

On May 15,2010,Brent purchased new farm equipment for $80,000.Brent used the equipment in connection with his farming business.Brent does not elect to expense assets under § 179.If Congress reenacts additional first-year depreciation for 2010,Brent does elect not to take additional first-year depreciation.Determine the cost recovery deduction for 2010.

Joe purchased a new five-year class asset on June 1,2010.The asset is listed property (not an automobile).It was used 55% for business and 45% for the production of income.The asset cost $500,000.Joe made the § 179 election.Joe's taxable income would not create a limitation for purposes of the § 179 deduction.If Congress reenacts additional first-year depreciation for 2010,Joe elects not to take additional first-year depreciation.Determine Joe's total cost recovery (including the § 179 deduction)for the year.

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

Barry purchased a used business asset (seven-year property)on November 30,2010,at a cost of $200,000.This is the only asset he purchased during the year.Barry did not elect to expense any of the asset under § 179,nor did he elect straight-line cost recovery.Barry sold the asset on July 17,2011.Determine the cost recovery deduction for 2011.

The key date for calculating cost recovery is the date the asset is purchased.

Carlos purchased an apartment building on November 16,1989,for $1,000,000.Determine the cost recovery for 2010.

If a new $80,000 automobile used 100% for business in the first year (2010)fails the 50% business usage test in the second year,no cost recovery will be recaptured.

Tan Company acquires a new machine (ten-year property)on January 15,2010,at a cost of $200,000.Tan also acquires another new machine (seven-year property)on November 5,2010,at a cost of $40,000.No election is made to use the straight-line method.The company does not make the § 179 election.If Congress reenacts additional first-year depreciation for 2010,Tan did elect not to take additional first-year depreciation.Determine the total deductions in calculating taxable income related to the machines for 2010.

Howard's business is raising and harvesting peaches.On March 10,2010,Howard purchased 10,000 new peach trees at a cost of $50,000.Howard does not elect to expense assets under § 179.Determine the cost recovery deduction for 2010.

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

Hazel purchased a new business asset (five-year property)on November 30,2010,at a cost of $100,000.This was the only asset acquired by Hazel during 2010.On January 7,2011,Hazel placed the asset in service.She did not elect to expense any of the asset cost under § 179,nor did she elect straight-line cost recovery.If Congress reenacts additional first-year depreciation for 2010,Hazel did elect not to take additional first-year depreciation.On October 25,2012,Hazel sold the asset.Determine the cost recovery for 2012.

White Company acquires a new machine (seven-year property)on January 10,2010,at a cost of $900,000.White makes the election to expense the maximum amount under § 179.No election is made to use the straight-line method.If Congress reenacts additional first-year depreciation for 2010,White does elect not to take additional first-year depreciation.Determine the total deductions in calculating taxable income related to the machine for 2010 assuming White has taxable income of $500,000.

ADS 150% declining-balance 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.

Sid bought a new $700,000 seven-year class asset on August 2,2010.On December 2,2010,he purchased $160,000 of used five-year class assets.If Congress reenacts additional first-year depreciation for 2010,Sid elects not to take additional first-year depreciation.If Sid elects § 179,what is the maximum write-off for these purchases for 2010?

On June 1,2010,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.

If 150% declining-balance is used,there is no straight-line switchover.

Land improvements are generally not eligible for cost recovery.

On June 1,2010,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. )If Congress reenacts additional first-year depreciation for 2010,she does elect not to take additional first-year depreciation.Determine the cost recovery deduction for 2011.

Self-created intangibles are generally not § 197 intangibles.