Exam 7: Property Acquisitions and Cost Recovery Deductions

When fully depreciating 5-year property, the final year of depreciation will be year:

What is the adjusted basis of an asset?

What is the difference between cost and percentage depletion?

The cost of assets with useful lives expected to extend for 2 or more years are capitalized with costs allocated over their useful lives.

On November 7, 2018, Wilson Corporation acquires 7-year property for $25,000. 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?

Software purchased in 2018 is eligible for

Soledad left her son Juan property valued at $700,000 when she died. Soledad paid $825,000 for the property but its adjusted basis was only $450,000 when she died. Juan did not want the building so he authorized the administrator to complete the sale of the building 6 months after Soledad's death for $650,000. Due to the decline in value of a number of Soledad's other assets after her death, the administrator elected the alternate valuation date for the assets. What is the realized and recognized gain or loss on the sale of the asset? Explain your answer.

The after-tax cost of a depreciable asset is dependent on the purchaser's marginal tax rate.

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: -The adjusted basis of an asset is:

Martin Corporation acquired 5-year property costing $2,185,000 on September 10, 2018. This is the only property acquired this year and Martin elects to expense the maximum amount under Section 179 and bonus depreciation. Martin's total cost recovery deduction for 2018 is:

Lopez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the last year for a 7-year asset acquired May 12 under the mid-quarter convention.

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: -The after-tax cost of an asset

MACRS means

Jeremy purchased an asset for $12,000 at the beginning of the year. No Section 179 expensing or bonus depreciation is claimed for this property. Assuming the asset is depreciated over three years on a straight-line basis, no averaging conventions apply, Jeremy's tax rate is 35 percent, and he uses a 6 percent discount rate, what is the after-tax cost of the asset?

The first and last years of MACRS depreciation deductions for a 5-year asset costing $10,000 using the half-year convention are:

If a business acquired a new machine in 2018, explain how it could have recovered its cost most efficiently. How does this differ from the maximum cost recovery deduction if the machine was instead acquired in 2017?

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

The MACRS life for all realty is 27½ years.

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 2018. It purchased and placed in service the following assets during 2018: 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 2018, what would its maximum cost recovery deduction be for 2018?