Question 1

On March 3, 2019, Sally purchased and placed in service a building costing $12,000,000.The building has 10 floors.
The bottom three floors are rented out to businesses.The top seven floors are residential apartments.The gross rents from the businesses are $60,000 and the gross rents from the apartments are $110,000.Determine Sally's cost recovery for the building in 2019.

Accepted Answer

The answer of On March 3, 2019, Sally purchased and...

Question 2

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination.

Accepted Answer

The answer of Discuss the criteria used to determine whether...

Question 3

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 4

Property that is classified as personalty may be depreciated.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following depreciation conventions are not used under MACRS?

Accepted Answer

A) Full-month. 
B) Mid-month. 
C) Half-year. 
D) Mid-quarter. 
E) All of these are used under MACRS.

Question 6

On May 2, 2019, Karen placed in service a new sports utility vehicle that cost $60,000 and has a gross vehicle weight of 6,300 lbs.The vehicle is used 60% for business and 40% for personal use.Determine Karen's total cost recovery for 2019.Karen wants to use both §179 and additional first-year depreciation.

Accepted Answer

A) $7,200 
B) $25,500 
C) $27,200 
D) $36,000

Question 7

The amortization period for $58,000 of startup expenses is 180 months.

Accepted Answer

A) True 
 B)False

Question 8

The luxury auto cost recovery limits applies to all automobiles.

Accepted Answer

A) True 
 B)False

Question 9

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

Accepted Answer

The answer of Discuss the tax consequences of listed property...

Question 10

The amount of startup expenditures that can be deducted in the year incurred is the greater of the actual amount of such expenses or $5,000.

Accepted Answer

A) True 
 B)False

Question 11

On January 1, 2019, SymboNet Company completed its acquisition of NetOpen.As part of the acquisition, $2 million was allocated to goodwill.What is SymboNet's amortization deduction related to the goodwill for 2019?

Accepted Answer

A) $0. 
B) $100,000. 
C) $133,333. 
D) $200,000.

Question 12

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 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 decreases taxable income in the early years of the asset's life.

Question 14

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

Accepted Answer

The answer of Discuss the requirements for startup expenditures to...

Question 15

Orange Corporation begins business on April 2, 2019.The corporation reports startup expenditures of $64,000 all incurred last year.Determine the total amount that Orange can elect to deduct in 2019.

Accepted Answer

A) $0 
B) $3,200 
C) $4,267 
D) $7,950

Question 16

White Company acquires a new machine (seven-year property) on January 10, 2019, at a cost of $620,000.White makes the election to expense the maximum amount under § 179, and wants to take any additional first-year depreciation allowed.No election is made to use the straight-line method.Determine the total deductions in calculating taxable income related to the machine for 2019 assuming White has taxable income of $800,000.

Accepted Answer

A) $88,598 
B) $301,159 
C) $568,574 
D) $620,000

Question 17

The key date for calculating cost recovery is the date the asset is placed in service.

Accepted Answer

A) True 
 B)False

Question 18

In 2019, Marci is considering starting a new business.Marci incurs the following costs associated with this venture. $$\begin{array} { l r } 
\text { Advertising } & \$ 5,000 \
\text { Travel } & 10,000 \
\text { Market surveys } & 8,000 \
\text { Professional services } & 30,000 \
\text { Interest expense } & 2,000 \
\text { Taxes } & 1,000
\end{array}$$ Marci started the new business on January 5, 2020.Determine the deduction for her startup costs for 2019.

Accepted Answer

The answer of In 2019, Marci is considering starting a...

Question 19

Martin is a sole proprietor of a sandwich business.On March 4, 2019, he purchased and placed in service new seven-year class assets costing $580,000.Martin's business reports taxable income of $160,000 for the year before any deductions associated with the purchased assets.Martin also received $30,000 of interest income for the year, which is not related to the business.Martin wants his adjusted gross income for the year to be as low as possible.With this objective in mind, determine how Martin should recover the cost of the acquired assets.

Accepted Answer

The answer of Martin is a sole proprietor of a...

Question 20

Land improvements are generally not eligible for cost recovery.

Accepted Answer

A) True 
 B)False

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

Discuss the criteria used to determine whether a building is residential or nonresidential realty.Also explain the tax consequences resulting from this determination.

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.

Property that is classified as personalty may be depreciated.

Which of the following depreciation conventions are not used under MACRS?

The amortization period for $58,000 of startup expenses is 180 months.

The luxury auto cost recovery limits applies to all automobiles.

Discuss the tax consequences of listed property being used for the production of income compared to being used in a trade or business.

The amount of startup expenditures that can be deducted in the year incurred is the greater of the actual amount of such expenses or $5,000.

On January 1, 2019, SymboNet Company completed its acquisition of NetOpen.As part of the acquisition, $2 million was allocated to goodwill.What is SymboNet's amortization deduction related to the goodwill for 2019?

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

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

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

Orange Corporation begins business on April 2, 2019.The corporation reports startup expenditures of $64,000 all incurred last year.Determine the total amount that Orange can elect to deduct in 2019.

The key date for calculating cost recovery is the date the asset is placed in service.

Land improvements are generally not eligible for cost recovery.