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Exam 10: Cost Recovery on Property: Depreciation, depletion, and Amortization

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Question 31

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Listed property rules include the following: I.If listed property is not predominantly used in the taxpayer's business,the business-use portion of the asset cannot be depreciated. II.If more than 50 percent of the listed property's total use for each year is related to the taxpayer's business,the asset is treated the same as any other mixed-use business asset. III.When listed property is used 50% or less in the taxpayer's business,the Section 179 expense election does not apply to the asset. IV.Listed property includes computers,and passenger automobiles.

A) Statements I and III are correct.
B) Only statement IV is correct.
C) Statements II and III are correct.
D) Statements II, III, and IV are correct.
E) Statements I, II, III, and IV are correct.

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Question 32

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To compute depreciation using MACRS on an asset purchased today,you need to know I.the asset's depreciable basis. II.the recovery period of the asset. III.the first and last year convention that applies to the asset's class. IV.whether you want to minimize or maximize the current year's depreciation.

A) Only statement II is correct.
B) Statements I and II are correct.
C) Statements I, III, and IV are correct.
D) Statements II and III are correct.
E) Statements I, II, III, and IV are correct.

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Question 33

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The Reed CPA Firm places the following property in service during the 2013 tax year: $\begin{array}{llll}\text { Froperty }&\text { Placed in }\\\underline{\text { Description }}& \underline{\text { Service }} &\underline{\text { MACRS Life }}&\underline{\text { Cost B asis }} \\\text { Computers } & \text { Feb 6 } & 5 \text { years } & \$ 40,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 80,000 \\\text { Switchboard system } & \text { Nov 3 } & 5 \text { years } & \$ 130,000\\\end{array}$ Reed wants to obtain the maximum possible depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179.Reed does not elect out of bonus depreciation.Reed will report 2013 taxable income in the amount of $100,000 before consideration of depreciation on their 2013 property acquisitions.What is Reed' maximum depreciation from these additions?

The mid-quarter convention I.never applies to real estate. II.is required when more than 30% of the depreciable basis of certain property is placed into service during the last 3 months of the tax year.

Serena owns a van that she paid $22,000 for in 2010 and used exclusively for personal purposes until May 9,2013,when she began using the van in her plumbing business.On May 9,2013,a comparable van was selling for $13,000.Serena sells the van on October 28,2015.Assuming that the van is 5-year MACRS property,it is not listed property,and that Serena did not make the Section 179 election to expense on the van,what is her allowable depreciation deduction in 2015?

Which of the following assets would be allowed a depreciation deduction? I.A truck used to provide transportation to a job site. II.A car used for personal purposes. III.An apartment building rented out for the production of rental income. IV.A personal-use computer of the taxpayer.

The Ross CPA Firm places the following property in service during the 2013 tax year: $\begin{array}{llll}\text { Froperty }&\text { Placed in }\\\underline{\text { Description }}& \underline{\text { Service }} &\underline{\text { MACRS Life }}&\underline{\text { Cost B asis }} \\\text { Computers } & \text { Feb 6 } & 5 \text { years } & \$ 40,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 80,000 \\\text { Switchboard system } & \text { Nov 3 } & 5 \text { years } & \$ 130,000\\\end{array}$ Ross wants to obtain the maximum possible depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179.Ross elects out of bonus depreciation.Ross will report 2013 taxable income in the amount of $100,000 before consideration of depreciation on their 2013 property acquisitions.What is Ross' maximum depreciation from these additions?

The earlier the depreciation deduction can be taken,the greater the present value of the tax savings will be to the taxpayer.

Nonresidential commercial realty placed in service on March 2,2012,is depreciated over

Jim places a new lift truck (7-year MACRS property) into service on January 16,2013.He pays $30,000 for the truck.This is the only business asset placed into service during this year.Jim does not desire to use the Section 179 election and elects out of bonus depreciation.How much depreciation may Jim deduct for 2013?

In 2013,Sanford Corporation purchases and places in service $2,050,000 of equipment for its manufacturing business.What portion of the $2,050,000 may Sanford elect to treat as a Section 179 expense?

Determine the largest possible MACRS cost recovery deduction for 2013 on the following assets,which were purchased for use in Greg's Accounting Services on July 1,2013.Greg elects out of bonus depreciation deduction. $\begin{array}{lc}\text { Assets } & \text { Cost } \\\text { Office equipment } & \$ 486,000 \\\text { Computer and printers } & 40,000 \\\text { Office building (exclusive of land) } & 150,000\end{array}$ a.Office equipment depreciation for 2013:MACRS recovery period__________Depreciable basis__________Depreciation__________ b.Computer and printer depreciation for 2013:MACRS recovery period__________Depreciable basis__________Depreciation__________ c.Office building depreciation for 2013:MACRS Class Life__________Depreciable basis__________Depreciation__________ d.Assume the office equipment is sold on December 2, 2015. Determine the cost recovery deduction for the year 2015.Depreciation: e.Assume the building is sold on December 2, 2015. Determine the cost recovery deduction for the year 2015.Depreciation:

Greenville Floral places a new tractor (7-year MACRS) into service on January 8,2013.They pay $28,000 for the tractor.This is the only business asset placed into service during this year.Greenville Floral wants to minimize the amount of depreciation deductible in 2013.What is Greenville Floral's cost recovery for 2013?

The Lovell Accounting Firm places the following new property in service during the 2013 tax year: $\begin{array}{llll}\text { Froperty }&\text { Placed in }\\\underline{\text { Description }}& \underline{\text { Service }} &\underline{\text { MACRS Life }}&\underline{\text { Cost B asis }} \\ \text { Computers } & \text { Feb 6 } & 5 \text { years } & \$ 80,000 \\\text { Office furniture } & \text { June } 24 & 7 \text { years } & \$ 110,000 \\\text { Fax machine } & \text { Aug 3 } & 5 \text { years } & \$ 100,000 \\\text { Sidewalk } & \text { Dec 11 } & 15 \text { years } & \$ 50,000\end{array}$ Lovell wants to obtain the maximum possible first year depreciation deduction for these property acquisitions including full utilization of the election to expense property under Section 179,and they do not elect out of bonus depreciation.Lovell will report 2013 taxable income in the amount of $150,000 before consideration of depreciation on their 2013 property acquisitions.What is the maximum combined amount of depreciation and Section 179 expense that may be obtained under this set of fact circumstances?

Sorensen Corporation purchases eqipment in 2013 for $2,200,000.Sorensen has substantial taxable income and desires to minimize this amount to the fullest extent possible.How much can Sorensen deduct under Section 179?

Which of the following correctly describe(s) cost recovery of automobiles placed in service in 2012?

Ralph buys a new truck (5-year MACRS property) to use in his landscaping business on May 13,2013,at a cost of $18,000.On November 5,2013,Ralph takes advantage of an end of the season clearance sale to purchase various landscaping equipment (7-year MACRS property) costing $34,000.Assuming that Ralph does not wish to immediately expense any of the cost of the property purchased this year,and he elects out of bonus depreciation,what is his 2013 maximum allowable cost recovery deduction?

Shannon purchases equipment classified as 3-year property on December 19,2013,at a cost of $100,000.Section 179 is not elected,it elects out of bonus depreciation and Shannon does not use the straight-line method.Shannon purchased no other depreciable property in 2013.What is the amount of the MACRS depreciation deduction for 2013?

If the total amount paid for a business is greater than the sum of the net fair market values of the assets of the business,the excess

What is the MACRS recovery period for a video game used in an arcade?