Exam 6: Property Acquisitions and Cost Recovery Deductions

Explain the basic procedure for determining the net cost of a depreciable asset using net cash flow with a five-year MACRS life and no salvage value.

Barber Corporation purchased all the assets of TECO Corporation for $1,820,000.An appraisal yielded the following: the building had a fair market value of $1,200,000; equipment a value of $1,000,000; and office equipment a value of $400,000.What is the depreciable basis for the office equipment?

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 used office equipment for 2014?

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. What is Sanjuro Corporation's cost recovery deduction for the computer equipment for 2015?

All of the following are characteristics of percentage depletion except:

Jack did not depreciate one of his machines that cost $40,000 because he had net operating losses for the last two years.Which of the following statements is true?

What is the maximum amount that can be spent on depreciable personalty in the last quarter of 2015 to avoid the mid-quarter convention if $240,000 of equipment was purchased in the first three quarters ?

What is the difference in the basis of an asset acquired by gift and one acquired by inheritance?

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. What is Sanjuro Corporation's maximum deduction for cost recovery for the automobile for 2016?

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. What is Sanjuro Corporation's cost recovery deduction for the automobile for 2017?

All of the following are acceptable conventions for MACRS property except:

What are the permissible tax treatments for research and experimentation expenditures?

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. What is Sanjuro Corporation's maximum deduction for cost recovery for the warehouse for 2015?

The alternative depreciation system uses a straight-line allocation of an asset's cost to determine depreciation expense.

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 computer equipment for 2014?

What is the difference between cost and percentage depletion?

Chipper,a calendar-year corporation,purchased new machinery for $1,125,000 in February,2014.In October,it purchased $1,075,000 of used machinery.What was Chipper's maximum cost recovery deduction for 2014?

MACRS means

What is the difference in after-tax cost of a five-year machine costing $10,000 that is depreciated using MACRS depreciation versus the alternative depreciation system? The taxpayer is in the 35 percent tax bracket and uses a 6 percent discount rate for evaluation.No Section 179 expensing or bonus depreciation is claimed for this property

Bangor Company incurred $70,000 of research costs in year 1.In May of year 2,it began to sell the products developed through this research.Which of the following is correct regarding these expenditures?