Question 1

On June 30,2017,Temika purchased office furniture (7-year property)costing $400,000 and computers (5-year property)with a cost of $250,000.She uses Sec.179,but the assets do not qualify for bonus depreciation.Her business income is $790,000 without considering Sec.179.How should she allocate the Sec.179 election in order to maximize her total cost recovery deductions (depreciation and Sec.179)for 2017 ?

Accepted Answer

The answer of On June 30,2017,Temika purchased office furniture (7-year...

Question 2

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 30% for business.The maximum depreciation deduction for the van is

Accepted Answer

A) $360. 
B) $720. 
C) $2,400. 
D) $1,980.

Question 3

If the business use of listed property is 50% or less of the total usage,the alternative depreciation system must be used.

Accepted Answer

A) True 
 B)False

Question 4

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 5

Most taxpayers elect to expense R&E expenditures because of the immediate tax benefit.

Accepted Answer

A) True 
 B)False

Question 6

In January of 2017,Brett purchased a Porsche for $100,000 to be used in his business.Brett drove the car 83 percent of the time for business.What is the maximum amount that Brett may deduct in 2017?

Accepted Answer

The answer of In January of 2017,Brett purchased a Porsche...

Question 7

Unless an election is made to expense research and experimental expenditures or to defer and amortize the expenditures,these costs must be capitalized.

Accepted Answer

A) True 
 B)False

Question 8

Terra Corporation,a calendar-year taxpayer,purchases and places into service machinery with a 7-year life that costs $650,000.Neither the mid-quarter convention,nor bonus depreciation apply.Terra elects to depreciate the maximum under Sec.179.Terra's taxable income for the year before the Sec.179 deduction is $700,000.What is Terra's total depreciation deduction related to this property (rounded to the nearest dollar)?

Accepted Answer

A) $650,000 
B) $530,006 
C) $92,885 
D) $602,885

Question 9

In calculating depletion of natural resources each period,

Accepted Answer

A) cost depletion must be used. 
B) percentage depletion must be used. 
C) the greater of cost depletion or percentage depletion must be used. 
D) the smaller of cost depletion or percentage depletion must be used.

Question 10

In order for an asset to be depreciated in the year of purchase,it must be placed in service before year's end.

Accepted Answer

A) True 
 B)False

Question 11

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 take any Sec.179 deduction.The maximum depreciation deduction for the van is

Accepted Answer

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

Question 12

Quattro Enterprises,a calendar-year taxpayer,leases the twentieth floor of a building downtown.Due to employment expansion,it renovated the entire office space layout,spending $600,000 on these leasehold improvements.The office renovation was completed in May.Quattro also spent $510,000 on new computer systems and office furniture and fixtures in May on which the business used its entire Sec.179 allowance for 2017.What is the maximum depreciation deduction available in 2017 for the leasehold improvements?

Accepted Answer

A) $9,630 
B) $40,000 
C) $310,000 
D) $20,000

Question 13

Residential rental property is defined as property from which more than 80% of the gross rental income is rental income from dwelling units.

Accepted Answer

A) True 
 B)False

Question 14

In April 2017,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,and it is not eligible for bonus depreciation.Emma's depreciation on the machine this year is

Accepted Answer

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

Question 15

Kenrick is an employee of the Theta Corp.sales department.He uses his automobile 75% for making sales calls.He can deduct depreciation on his auto by reporting on Form 4562 (Depreciation and Amortization).

Accepted Answer

A) True 
 B)False

Question 16

Stellar Corporation purchased all of the assets of Bellavia Company as of January 1 this year for $1 million.Included in the assets acquired are the following intangible assets:
  What is Stellar's maximum amortization deduction for the year?

Accepted Answer

The answer of Stellar Corporation purchased all of the assets...

Question 17

Depreciable property includes business,investment,and personal-use assets.

Accepted Answer

A) True 
 B)False

Question 18

In accounting for research and experimental expenditures,all of the following alternatives are available with the exception of

Accepted Answer

A) expense R&E costs in the year paid or incurred. 
B) expense R&E costs in the year in which a product or process becomes marketable. 
C) defer and amortize R&E costs as a ratable deduction over a period of 60 months or more. 
D) capitalize and write off R&E costs only when the research project is abandoned or is worthless.

Question 19

Amounts paid in connection with the acquisition of a business which represent a covenant not to compete are amortizable over the covenant's remaining life.

Accepted Answer

A) True 
 B)False

Question 20

Under what circumstances might a taxpayer elect the alternative depreciation system for new equipment acquired this year?

Accepted Answer

A) A taxpayer has significant charitable contribution carryovers that will expire after this year. 
B) A taxpayer is undertaking a major R&E project which will result in an usually low marginal tax rate for the next few years. 
C) A taxpayer has significant NOL carryovers. 
D) All of the above.

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

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 30% for business.The maximum depreciation deduction for the van is

If the business use of listed property is 50% or less of the total usage,the alternative depreciation system must be used.

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

Most taxpayers elect to expense R&E expenditures because of the immediate tax benefit.

In January of 2017,Brett purchased a Porsche for $100,000 to be used in his business.Brett drove the car 83 percent of the time for business.What is the maximum amount that Brett may deduct in 2017?

Unless an election is made to expense research and experimental expenditures or to defer and amortize the expenditures,these costs must be capitalized.

In calculating depletion of natural resources each period,

In order for an asset to be depreciated in the year of purchase,it must be placed in service before year's end.

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 take any Sec.179 deduction.The maximum depreciation deduction for the van is

Residential rental property is defined as property from which more than 80% of the gross rental income is rental income from dwelling units.

In April 2017,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,and it is not eligible for bonus depreciation.Emma's depreciation on the machine this year is

Kenrick is an employee of the Theta Corp.sales department.He uses his automobile 75% for making sales calls.He can deduct depreciation on his auto by reporting on Form 4562 (Depreciation and Amortization).

Stellar Corporation purchased all of the assets of Bellavia Company as of January 1 this year for $1 million.Included in the assets acquired are the following intangible assets: What is Stellar's maximum amortization deduction for the year?

Depreciable property includes business,investment,and personal-use assets.

In accounting for research and experimental expenditures,all of the following alternatives are available with the exception of

Amounts paid in connection with the acquisition of a business which represent a covenant not to compete are amortizable over the covenant's remaining life.

Under what circumstances might a taxpayer elect the alternative depreciation system for new equipment acquired this year?