Question 1

Automobiles are subject to specific limitations on the amount of annual depreciation deductions.

Accepted Answer

A) True 
 B)False  True

Question 2

William has decided to purchase a large apartment complex. He pays $100,000 cash, obtains a loan on the property for $500,000, and assumes the first mortgage balance of $250,000. He also gives the sellers $100,000 of marketable securities that he purchased three years ago for $125,000. He paid a finder's fee of $5,000, legal fees of $6,000, and transfer taxes of $12,000. What is William's acquisition basis for the building? Does he have any other tax consequences as a result of this purchase?

Accepted Answer

Acquisition basis = $100,000 cash + $500,000 loan + $250,000 loan assumption + $100,000 fair market value of marketable securities given + $23,000 ($5,000 + $6,000 + $12,000) of purchase expenses = $973,000 basis.
William has a realized and recognized loss of $25,000 ($100,000 - $125,000) on the marketable securities that he uses as part of the purchase price of the complex.

Question 3

Harris Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on October 2nd. What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

Accepted Answer

A)  $3,500 and $138 
B)  $2,500 and $426 
C)  $1,500 and $706 
D)  $500 and $958 
A)  $3,500 and $138 
B)  $2,500 and $426 
C)  $1,500 and $706 
D)  $500 and $958 D

Question 4

Which averaging conventions are used for MACRS depreciation?

Accepted Answer

Personalty is subject to two d

Question 5

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-Mid-month convention

Accepted Answer

The answer of Other Objective Questions
Indicated by a P for...

Question 6

Useful lives for realty include all of the following except:

Accepted Answer

A)  25 years 
B)  27.5 years 
C)  39 years 
D)  40 years 
A)  25 years 
B)  27.5 years 
C)  39 years 
D)  40 years

Question 7

On June 20, 2018 Baker Corporation (a calendar-year taxpayer) acquired 5-year equipment costing $30,000 and on October 28, 2018, it acquired 7-year equipment costing $160,000. Baker did not claim Section 179 expensing or bonus depreciation and no other assets were acquired during the year. Baker's depreciation for 2018 is:

Accepted Answer

A)  $28,864 
B)  $27,152 
C)  $13,212 
D)  $7,212 
A)  $28,864 
B)  $27,152 
C)  $13,212 
D)  $7,212

Question 8

Momee Corporation, a calendar-year corporation, bought only one asset in 2013, a crane it purchased for $700,000 on November 24. It disposed of the asset in April, 2018. What is its depreciation deduction for this asset in 2018 if cost recovery was determined using only regular MACRS?

Accepted Answer

A)  $62,510 
B)  $61,110 
C)  $31,255 
D)  $22,916 
A)  $62,510 
B)  $61,110 
C)  $31,255 
D)  $22,916

Question 9

The lease inclusion amount increases the deduction a person may take for business use of a leased automobile.

Accepted Answer

A) True 
 B)False

Question 10

The first year's depreciation for equipment acquired in October by a calendar-year business would be based on 1½ months if it was the only asset acquired that year.

Accepted Answer

A) True 
 B)False

Question 11

On October 12, 2018, Wilson Corporation (a calendar-year taxpayer) acquires 5-year property for $9,000. This is the only property acquired this year and neither Section 179 expensing nor bonus depreciation were claimed. What is Wilson's total depreciation deduction for 2018?

Accepted Answer

A)  $1,800 
B)  $1,350 
C)  $900 
D)  $450 
A)  $1,800 
B)  $1,350 
C)  $900 
D)  $450

Question 12

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 marginal bracket and uses a 6 percent discount rate for evaluation. No Section 179 expensing or bonus depreciation is claimed for this property

Accepted Answer

@#IMG-DLM& The present value o

Question 13

In May 2017, Stephen acquired a used automobile for $12,000 that he used 75% for business. No Sec. 179 election was made. In 2017, Stephen's business use of the automobile decreases to 45%. As a result of this change in business use:

Accepted Answer

A)  The change does not affect the way Stephen computes his 2017 depreciation 
B)  Stephen's depreciation in 2017 is $2,250. 
C)  Stephen must recapture $900 as ordinary income in 2017 
D)  Stephen must amend the 2017 tax return and recompute depreciation. 
A)  The change does not affect the way Stephen computes his 2017 depreciation 
B)  Stephen's depreciation in 2017 is $2,250. 
C)  Stephen must recapture $900 as ordinary income in 2017 
D)  Stephen must amend the 2017 tax return and recompute depreciation.

Question 14

Gonzalez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the first year for a 7-year asset acquired February 15 under the mid-quarter convention.

Accepted Answer

A)  25% 
B)  17.85% 
C)  10.71% 
D)  3.57% 
A)  25% 
B)  17.85% 
C)  10.71% 
D)  3.57%

Question 15

Research and experimentation expenditures can be:

Accepted Answer

A)  Expensed when incurred. 
B)  Amortized over 60 or more months. 
C)  Either (a) or (b). 
D)  Neither (a) nor (b). 
A)  Expensed when incurred. 
B)  Amortized over 60 or more months. 
C)  Either (a) or (b). 
D)  Neither (a) nor (b).

Question 16

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

Accepted Answer

A)  Mid-week 
B)  Mid-month 
C)  Mid-quarter 
D)  Half-year 
A)  Mid-week 
B)  Mid-month 
C)  Mid-quarter 
D)  Half-year

Question 17

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.

Accepted Answer

Net cash flow is cash outflow less cash

Question 18

Section 179 expensing does not apply to used property.

Accepted Answer

A) True 
 B)False

Question 19

On June, 20, 2018, Simon Corporation (a calendar-year corporation) purchased and placed in service a new automobile costing $68,000. This vehicle is used 100% for business. Simon makes whatever elections are necessary to maximum its overall depreciation deduction for the year of acquisition. What would be Simon Corporation's cost recovery deduction for the automobile for 2019?

Accepted Answer

A)  $0 
B)  $12,000 
C)  $16,000 
D)  $18,000 
A)  $0 
B)  $12,000 
C)  $16,000 
D)  $18,000

Question 20

Allen Corporation acquired 5-year property costing $150,000 on September 10, 2018. 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 2018 for Section 179 expensing?

Accepted Answer

A)  $10,000 
B)  $15,000 
C)  $25,000 
D)  $150,000 
A)  $10,000 
B)  $15,000 
C)  $25,000 
D)  $150,000

Automobiles are subject to specific limitations on the amount of annual depreciation deductions.

Harris Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on October 2^nd. What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

Which averaging conventions are used for MACRS depreciation?

Other Objective Questions Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions: -Mid-month convention

Useful lives for realty include all of the following except:

Momee Corporation, a calendar-year corporation, bought only one asset in 2013, a crane it purchased for $700,000 on November 24. It disposed of the asset in April, 2018. What is its depreciation deduction for this asset in 2018 if cost recovery was determined using only regular MACRS?

The lease inclusion amount increases the deduction a person may take for business use of a leased automobile.

The first year's depreciation for equipment acquired in October by a calendar-year business would be based on 1½ months if it was the only asset acquired that year.

On October 12, 2018, Wilson Corporation (a calendar-year taxpayer) acquires 5-year property for $9,000. This is the only property acquired this year and neither Section 179 expensing nor bonus depreciation were claimed. What is Wilson's total depreciation deduction for 2018?

In May 2017, Stephen acquired a used automobile for $12,000 that he used 75% for business. No Sec. 179 election was made. In 2017, Stephen's business use of the automobile decreases to 45%. As a result of this change in business use:

Gonzalez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the first year for a 7-year asset acquired February 15 under the mid-quarter convention.

Research and experimentation expenditures can be:

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

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.

Section 179 expensing does not apply to used property.

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 7: Property Acquisitions and Cost Recovery Deductions

Automobiles are subject to specific limitations on the amount of annual depreciation deductions.

Harris Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on October 2nd. What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

Which averaging conventions are used for MACRS depreciation?

Other Objective Questions Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions: -Mid-month convention

Useful lives for realty include all of the following except:

Momee Corporation, a calendar-year corporation, bought only one asset in 2013, a crane it purchased for $700,000 on November 24. It disposed of the asset in April, 2018. What is its depreciation deduction for this asset in 2018 if cost recovery was determined using only regular MACRS?

The lease inclusion amount increases the deduction a person may take for business use of a leased automobile.

The first year's depreciation for equipment acquired in October by a calendar-year business would be based on 1½ months if it was the only asset acquired that year.

On October 12, 2018, Wilson Corporation (a calendar-year taxpayer) acquires 5-year property for $9,000. This is the only property acquired this year and neither Section 179 expensing nor bonus depreciation were claimed. What is Wilson's total depreciation deduction for 2018?

In May 2017, Stephen acquired a used automobile for $12,000 that he used 75% for business. No Sec. 179 election was made. In 2017, Stephen's business use of the automobile decreases to 45%. As a result of this change in business use:

Gonzalez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the first year for a 7-year asset acquired February 15 under the mid-quarter convention.

Research and experimentation expenditures can be:

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

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.

Section 179 expensing does not apply to used property.

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Business Expenses

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Harris Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on October 2^nd. What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?