Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

On January 15, 2018, 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 2018 of $500,000. The percentage depletion rate is 22%. Determine Vern's depletion deduction for 2018.

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 3

The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds will not apply if the sports utility vehicle is used as a taxi.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following assets would be subject to cost recovery?

Accepted Answer

A)  A painting by Picasso hanging on a physician's office wall. 
B)  An antique vase in a doctor's waiting room. 
C)  Landscaping around the doctor's office. 
D)  a., b., and c. 
E)  None of the above. 
A)  A painting by Picasso hanging on a physician's office wall. 
B)  An antique vase in a doctor's waiting room. 
C)  Landscaping around the doctor's office. 
D)  a., b., and c. 
E)  None of the above.

Question 5

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

Accepted Answer

The purpose of the inclusion a

Question 6

Under MACRS, which one of the following is not considered in determining depreciation for tax purposes?

Accepted Answer

A)  Cost of asset. 
B)  Property recovery class. 
C)  Half-year convention. 
D)  Salvage (or residual) value. 
E)  None of the above. 
A)  Cost of asset. 
B)  Property recovery class. 
C)  Half-year convention. 
D)  Salvage (or residual) value. 
E)  None of the above.

Question 7

Maple Company purchases new equipment (7-year MACRS property) on January 10, 2018, at a cost of $430,000. Maple also purchases new machines (5-year MACRS property) on July 19, 2018 at a cost of $290,000. Maple wants to maximize its MACRS deductions? assume no taxable income limitations apply. What is Maple's total MACRS deduction for 2018?

Accepted Answer

A)  $119,447. 
B)  $560,000. 
C)  $617,148. 
D)  $720,000. 
A)  $119,447. 
B)  $560,000. 
C)  $617,148. 
D)  $720,000.

Question 8

Carlos purchased an apartment building on November 16, 2018, for $3,000,000. Determine the cost recovery for 2018.

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 9

On June 1, 2018, 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 not take additional first-year depreciation. Determine the cost recovery deduction for 2018.

Accepted Answer

A)  $1,776 
B)  $1,896 
C)  $4,800 
D)  $6,000 
E)  None of the above 
A)  $1,776 
B)  $1,896 
C)  $4,800 
D)  $6,000 
E)  None of the above

Question 10

For personal property placed in service in 2018, the § 179 maximum deduction is limited to $1,000,000.

Accepted Answer

A) True 
 B)False

Question 11

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 computed 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 12

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

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a characteristic of MACRS for property other than real estate?

Accepted Answer

A)  MACRS uses shorter asset lives. 
B)  MACRS increases taxable income in the early years of the asset's life. 
C)  MACRS accelerates cost recovery. 
D)  MACRS ignores salvage value. 
A)  MACRS uses shorter asset lives. 
B)  MACRS increases taxable income in the early years of the asset's life. 
C)  MACRS accelerates cost recovery. 
D)  MACRS ignores salvage value.

Question 14

All personal property placed in service in 2018 and used in a trade or business qualifies for additional first-year depreciation.

Accepted Answer

A) True 
 B)False

Question 15

Any § 179 expense amount that is carried forward is subject to the business income limitation in the carryforward year.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

If a taxpayer has a business with a net operating loss carryover reducing current year income, the taxpayer may want to elect to use straight-line depreciation to slow down the cost recovery.

Accepted Answer

A) True 
 B)False

Question 19

Land is generally amortized, rather than being cost recovered under MACRS.

Accepted Answer

A) True 
 B)False

Question 20

Rustin bought 7-year class property on May 15, 2018, for $1,228,000. Rustin elects § 179 and straight-line cost recovery, but not additional first-year depreciation.. Rustin's taxable income would not create a limitation for purposes of the § 179 deduction. Determine the maximum cost recovery deduction Rustin can claim for 2018.

Accepted Answer

The answer of Rustin bought 7-year class property on May...

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

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

The § 179 limit for a sports utility vehicle with a GVW of 7,000 pounds will not apply if the sports utility vehicle is used as a taxi.

Which of the following assets would be subject to cost recovery?

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

Under MACRS, which one of the following is not considered in determining depreciation for tax purposes?

Carlos purchased an apartment building on November 16, 2018, for $3,000,000. Determine the cost recovery for 2018.

For personal property placed in service in 2018, the § 179 maximum deduction is limited to $1,000,000.

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 computed as follows. If Tara sells the machine after three years for $15,000, how much gain should she recognize?

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

Which of the following is not a characteristic of MACRS for property other than real estate?

All personal property placed in service in 2018 and used in a trade or business qualifies for additional first-year depreciation.

Any § 179 expense amount that is carried forward is subject to the business income limitation in the carryforward year.

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

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

If a taxpayer has a business with a net operating loss carryover reducing current year income, the taxpayer may want to elect to use straight-line depreciation to slow down the cost recovery.

Land is generally amortized, rather than being cost recovered under MACRS.

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, Section 1231, and Recapture Provisions

Taxing Business Income

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

The Federal Gift and Estate Taxes

Income Taxation of Trusts and Estates

Filters