Exam 7: Accounting Periods and Methods and Depreciation

Steve Corp bought a $600,000 apartment building in June of 2016.Of the purchase price,$104,950 is allocated to the value of the land.What is the maximum amount of depreciation that the company can claim in 2017 (year 2)for the building?

To be depreciated,must an asset actually lose value each year?

If actual business use of an automobile is less than 100 percent,the annual automobile depreciation limitations must be reduced to reflect the actual business use only.

What is the minimum number of years over which computers may be depreciated under MACRS?

On January 1,2017,Ted purchased a small software company for $200,000.He paid $120,000 for the fixed assets of the company and $80,000 for goodwill.How much amortization may Ted deduct on his 2017 tax return for the purchased goodwill?

An asset (not an automobile)put in service in June 2017 has a depreciable basis of $535,000,a recovery period of 5 years,and is the only asset placed in service during the year.Assuming bonus depreciation is used,a half-year convention,and the expensing election is made,what is the maximum amount of cost that can be deducted in 2017 (assume no income limitation)?

Which one of the following is a Section 197 intangible?

Most partnerships,S corporations,and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

"Annualizing" is a method by which the taxpayer can usually decrease the amount of tax he or she pays.

During 2017,Travis purchases $13,000 of used manufacturing equipment (7-year property)for use in his business,his only asset purchase that year.Travis has taxable income from his business of $510,000.What is the maximum amount that Travis may deduct under the election to expense?

Under the cash basis of accounting,expenses are generally deducted in the year they are paid.

The tax law imposes restrictions on the depreciation of "listed" property such as automobiles and computers.

Which of the following statements with respect to the depreciation of real property under MACRS is correct?

If a cash basis business owner pays 18 months of rent expense in advance during the last month of the tax year,how is this treated on the tax return? What is the reason tax law requires this treatment?

Jerry and Julie are brother and sister.Jerry sold stock to Julie for $5,000,its fair market value.The stock cost Jerry $10,000 5 years ago.Also,Jerry sold Carol (an unrelated party)stock for $2,000 that cost $10,000 3 years ago.What is Jerry's recognized loss before the $3,000 capital loss limitation?

An asset (not an automobile)placed in service in June 2017 has a depreciable basis of $35,000 and a recovery period of 5 years.Assuming bonus depreciation is used,a half-year convention,and no expensing election,what is the maximum amount of cost that can be deducted in 2017?

Patrick purchased a used passenger automobile on June 1,2017.He paid $19,000 for the automobile.During 2017,he uses the automobile 75 percent of the time for business.Patrick wishes to claim the maximum amount of depreciation possible (no bonus depreciation or election to expense). a.Calculate Patrick's depreciation expense on the automobile for 2017 b.​ Calculate Patrick's depreciation expense on the automobile for 2018,assuming the same 75 percent business use.

If a taxpayer purchases land worth $200,000 with an office building valued at $100,000 on it,how are the two depreciated for tax purposes? Land: Office building:

An asset (not an automobile)placed in service in June 2017 has a depreciable basis of $2,055,000,a recovery period of 5 years,and is the only asset placed in service during the year.Assuming bonus depreciation is used,a half-year convention,and the expensing election is made for the maximum eligible amount,what is the amount of cost that can be deducted in 2017 assuming the business earned taxable income of $1,000,000 before deducting any cost recovery?

Betty purchases a used $12,000 car in 2017,to use exclusively in her business. a.What will the standard MACRS depreciation schedule be for the 6 years the auto is depreciated (no bonus expense)? Year 1: Year 2: Year 3: Year 4: Year 5: Year 6: b.If Betty holds the car until it is fully depreciated,and uses straight-line depreciation,how many years will this take?