Exam 6: Property Acquisitions and Cost Recovery Deductions

Research and experimentation expenditures can be:

The MACRS life for all realty is 27½ years.

The basis in property acquired by inheritance is normally its fair market value at the date of the decedent's death.

Research expenditures must be capitalized and amortized over the period the research is expected to benefit the business.

Depletion is the term used for the cost allocation of wasting assets.

Cora,a calendar-year corporation,purchased a new machine for $35,000 and some used office furniture for $180,000 in July 2015.What is Cora's maximum cost recovery deduction for 2015?

Gregory Corporation,a calendar-year corporation,purchased an office building in March of year 1.In September of year 17,it sold the building.What fraction must be applied to the MACRS percentage to determine the year 17 depreciation?

On June 20,2015 Baker Corporation (a calendar-year taxpayer)acquired 5-year equipment cost $30,000 and on October 28,2015,it acquired 7-year equipment cost $160,000.Baker did not elect Section 179 expensing and no other assets were acquired during the year.Baker's depreciation for 2015 is: a.$28,864 b.$27,152 c.$13,212 d.$7,212

Section 179 expensing does not apply to realty.

Useful lives for realty include all of the following except:

YumYum Corporation (a calendar-year corporation)moved into a new office building adjacent to its manufacturing plant in 2015.It purchased and placed in service the following assets during 2015: All assets are used 100% for business use.The office building does not include the cost of the land on which it is located that was an additional $300,000.The corporation had $900,000 income from operations before calculating depreciation deductions.If YumYum does not use Section 179 expensing and it elects to use straight-line depreciation on all of its assets,how much is its 2015 depreciation deduction?

When would it be advisable to use the alternative depreciation system? Which properties must be depreciated by the alternative depreciation system?

YumYum Corporation (a calendar-year corporation)moved into a new office building adjacent to its manufacturing plant in 2015.It purchased and placed in service the following assets during 2015: All assets are used 100% for business use.The office building does not include the cost of the land on which it is located that was an additional $300,000.The corporation had $900,000 income from operations before calculating depreciation deductions.If YumYum Corporation made all elections available to maximize its overall depreciation deduction for 2015.What is YumYum's maximum depreciation deduction for the office building in 2015?

Sanjuro Corporation (a calendar-year corporation)purchased and placed in service the following assets during 2014: All assets are used 100% for business use.The warehouse building does not include the cost of the land on which it is located which was an additional $1,000,000.The corporation has $3,000,000 income from operations before calculating depreciation deductions.Sanjuro Corporation made whatever elections were necessary to maximize its overall depreciation deduction for 2014.To maximize its total cost recovery deduction,what was Sanjuro Corporation's cost recovery deduction for the automobile for 2014?

What is the purpose of the lease inclusion amount for automobiles?

In May 2014,Stephen acquired a used automobile for $12,000 and used the automobile 75% for business.No Sec.179 election was made.In 2015,Stephen's business use of the automobile decreases to 45%.As a result of this change in business use:

Allen Corporation acquired 5-year property costing $150,000 on September 10,2015.This is the only property acquired this year and Allen elects to expense the maximum amount under Section 179.Allen's income before deducting depreciation is $15,000.What is the maximum amount that Allen can deduct in 2015 for Section 179 expensing?

In a basket purchase of a group of assets,the purchaser and the seller can agree to the value of the separate assets.

YumYum Corporation (a calendar-year corporation)moved into a new office building adjacent to its manufacturing plant in 2015.It purchased and placed in service the following assets during 2015: All assets are used 100% for business use.The office building does not include the cost of the land on which it is located that was an additional $300,000.The corporation had $900,000 income from operations before calculating depreciation deductions.YumYum Corporation made any elections available to maximize its overall depreciation deduction for 2015.What is its maximum depreciation deduction on the new automobile in 2015?

Software purchased in 2015 is eligible for