Question 1

Fariq purchases and places in service in 2019 personal property costing $2,571,000.The taxpayer plans to apply the Sec.179 deduction,but not bonus depreciation.What is the maximum Sec.179 deduction that Fariq can deduct,ignoring any taxable income limitation?

Accepted Answer

A)  $2,550,000
B)  $0
C)  $999,000
D)  $1,020,000 C

Question 2

In April 2019,Emma acquired a machine for $60,000 for use in her business.The machine is classified as 7-year property.Emma does not expense the asset under Sec.179 or bonus depreciation.Emma's depreciation on the machine for 2019 is

Accepted Answer

A)  $30,000.
B)  $60,000.
C)  $6,428.
D)  $8,574. D

Question 3

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property)for $12,000.He used the van 80% for business and 20% for personal purposes.Enrico does not apply Sec.179 or bonus depreciation.The maximum depreciation deduction for the van is

Accepted Answer

A)  $1,200.
B)  $2,400.
C)  $6,720.
D)  $1,920. D

Question 4

A client placed three new business assets into service in 2019.The client has high taxable income and would like to maximize the deduction by using bonus depreciation.All of the following assets will qualify for bonus depreciation except

Accepted Answer

A)  manufacturing equipment.
B)  computer software.
C)  a garage for the service vans.
D)  All of the assets qualify for bonus depreciation.

Question 5

William purchases nonresidential real property costing $300,000 and places it in service in March 2018.What is Lincoln's 2019 depreciation on the property?

Accepted Answer

A)  $6,099
B)  $7,692
C)  $8,637
D)  $10,908

Question 6

Joan bought a business machine for $15,000.In a later year,she sold the machine for $12,800 when the total allowable depreciation is $8,500.The depreciation actually taken on the tax returns totaled $8,000.Joan must recognize a gain (or loss)of

Accepted Answer

A)  no gain or loss.
B)  ($3,200) .
C)  $6,800.
D)  $6,300.

Question 7

A client placed $2,800,000 of five-year equipment into service in January 2019.Because taxable income is more than $10,000,000,she would like to maximize this year's depreciation deduction.The largest deduction allowed is

Accepted Answer

A)  $2,800,000.
B)  $560,000.
C)  $1,176,000.
D)  $1,020,000.

Question 8

Ilene owns an unincorporated manufacturing business.In 2019,she purchases and places in service $2,650,000 of qualifying five-year equipment for use in her business.Her taxable income from the business before any depreciation deduction is $900,000.Ilene will elect out of bonus depreciation but plans to take the maximum allowable deduction under Sec.179.Which of the following statements is true regarding the Sec.179 election?

Accepted Answer

A)  Ilene can deduct $1,020,000 as a Sec.179 deduction in 2019,with no carryover to next year.
B)  Ilene can deduct $920,000 as a Sec.179 deduction in 2019,with no carryover to next year.
C)  IIene can deduct $900,000 as a Sec.179 deduction in 2019; $20,000 may be carried over to next year.
D)  Ilene can deduct $900,000 as a Sec.179 deduction in 2019,with no carryover to next year.

Question 9

The MACRS system requires that residential rental property and nonresidential real property be depreciated using the straight-line method.

Accepted Answer

A) True 
 B)False

Question 10

Under the MACRS system,the same convention that applies in the year of acquisition (e.g.,half-year,mid-quarter,or mid-month)also applies in the year of disposition.

Accepted Answer

A) True 
 B)False

Question 11

Under the MACRS system,depreciation rates for real property must always use the mid-month convention in the year of acquisition.

Accepted Answer

A) True 
 B)False

Question 12

All of the following are true with regard to the alternative depreciation system except

Accepted Answer

A)  the principal type of property for which ADS is required is any tangible property which is used predominantly outside of the United States.
B)  the ADS election is available to real property on a property-by-property basis.
C)  the ADS election is available to personal property on a property-by-property basis.
D)  once the ADS election is made for specified property,it is irrevocable.

Question 13

On its tax return,a corporation will use the same depreciation,amortization and depletion methods used in its financial statements issued to shareholders.

Accepted Answer

A) True 
 B)False

Question 14

If a company acquires goodwill in connection with the acquisition of a business,the goodwill is amortizable over a 60-month period.

Accepted Answer

A) True 
 B)False

Question 15

The client is a corporation which uses high-tech equipment to manufacture its product.Because of the high level of wear and tear due to long production runs and frequent technology changes,the client usually replaces the equipment every two years.According to IRS guidance,the MACRS life of the equipment is five years.In order to accelerate depreciation deductions,which tax depreciation option should the client elect?

Accepted Answer

A)  alternative depreciation system (ADS) 
B)  regular MACRS treatment
C)  MACRS with a straight-line election
D)  units-of-production method

Question 16

Chahana acquired and placed in service $1,185,000 of equipment on August 1,2019 for use in her sole proprietorship.The equipment is 5-year recovery property.No other acquisitions are made during the year.Chahana elects to expense the maximum amount under Sec.179,and bonus depreciation is not applied.Chahana's total deductions for 2019 (including Sec.179 and depreciation)are

Accepted Answer

A)  $1,020,000.
B)  $237,000.
C)  $1,185,000.
D)  $1,053,000.

Question 17

Maria,a sole proprietor,has several items of office furniture and equipment which are depreciable.All were acquired before this year.She is not required to report her depreciation deduction on Form 4562.

Accepted Answer

A) True 
 B)False

Question 18

Intangible assets are subject to MACRS depreciation.

Accepted Answer

A) True 
 B)False

Question 19

If the business use of listed property decreases to 50% or less of the total usage,the property is subject to depreciation recapture.

Accepted Answer

A) True 
 B)False

Question 20

MACRS recovery property includes tangible personal and real property that is used in a trade or business.

Accepted Answer

A) True 
 B)False

Exam 26: Depreciation,cost Recovery,amortization,and Depletion

Fariq purchases and places in service in 2019 personal property costing $2,571,000.The taxpayer plans to apply the Sec.179 deduction,but not bonus depreciation.What is the maximum Sec.179 deduction that Fariq can deduct,ignoring any taxable income limitation?

In April 2019,Emma acquired a machine for $60,000 for use in her business.The machine is classified as 7-year property.Emma does not expense the asset under Sec.179 or bonus depreciation.Emma's depreciation on the machine for 2019 is

Enrico is a self-employed electrician.In May of the current year,Enrico acquired a used van (5-year property) for $12,000.He used the van 80% for business and 20% for personal purposes.Enrico does not apply Sec.179 or bonus depreciation.The maximum depreciation deduction for the van is

A client placed three new business assets into service in 2019.The client has high taxable income and would like to maximize the deduction by using bonus depreciation.All of the following assets will qualify for bonus depreciation except

William purchases nonresidential real property costing $300,000 and places it in service in March 2018.What is Lincoln's 2019 depreciation on the property?

Joan bought a business machine for $15,000.In a later year,she sold the machine for $12,800 when the total allowable depreciation is $8,500.The depreciation actually taken on the tax returns totaled $8,000.Joan must recognize a gain (or loss) of

A client placed $2,800,000 of five-year equipment into service in January 2019.Because taxable income is more than $10,000,000,she would like to maximize this year's depreciation deduction.The largest deduction allowed is

The MACRS system requires that residential rental property and nonresidential real property be depreciated using the straight-line method.

Under the MACRS system,the same convention that applies in the year of acquisition (e.g.,half-year,mid-quarter,or mid-month)also applies in the year of disposition.

Under the MACRS system,depreciation rates for real property must always use the mid-month convention in the year of acquisition.

All of the following are true with regard to the alternative depreciation system except

On its tax return,a corporation will use the same depreciation,amortization and depletion methods used in its financial statements issued to shareholders.

If a company acquires goodwill in connection with the acquisition of a business,the goodwill is amortizable over a 60-month period.

Maria,a sole proprietor,has several items of office furniture and equipment which are depreciable.All were acquired before this year.She is not required to report her depreciation deduction on Form 4562.

Intangible assets are subject to MACRS depreciation.

If the business use of listed property decreases to 50% or less of the total usage,the property is subject to depreciation recapture.

MACRS recovery property includes tangible personal and real property that is used in a trade or business.