Exam 7: Property Acquisitions and Cost Recovery Deductions

Chipper, a calendar-year corporation, purchased new machinery for $1,135,000 in February, 2018. In October, it purchased $2,105,000 of used machinery. What was Chipper's maximum cost recovery deduction for 2018?

Calvin gave his son ABC stock valued at $100,000 that he purchased for $50,000; he gave his daughter EFG stock valued at $100,000 that he purchased for $150,000. Calvin paid $30,000 in gift taxes on each of these gifts. What are the son's and daughter's bases in the stock received?

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?

MACRS depreciation for 5-year assets is based on:

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

What limitations apply to the use of Section 179 expensing in 2018? What would have been different if this asset had been acquired in 2017?

The lease inclusion amount:

All of the following are characteristics of percentage depletion except:

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: -Lease inclusion amounts

Conrad Corporation has a June 30 year end. What is the MACRS depreciation percentage deduction for the first year for a 5-year asset acquired October 15 under the mid-quarter convention.

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2018: 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 2018. What would be Sanjuro Corporation's cost recovery deduction for the warehouse for 2019 if it is sold in November of 2019?

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. YumYum Corporation made any elections available to maximize its overall depreciation deduction for 2018. What is its maximum depreciation deduction on the new automobile in 2018?

Zachary purchased a new car on August 1, 2017 for $14,500. His records indicate that he uses the car 45 percent for business and 55 percent for personal use. What are his cost recovery deductions for 2017 and 2018?

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:

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2018: 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 2018. What was Sanjuro Corporation's maximum total cost recovery deduction for 2018?

What is the maximum amount that can be spent on depreciable personalty in the last quarter of 2018 to avoid the mid-quarter convention if $240,000 of equipment was purchased in the first three quarters?

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

Sanjuro Corporation (a calendar-year corporation) purchased and placed in service the following assets during 2018: 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 2018. What would be Sanjuro Corporation's cost recovery deduction for the used office equipment for 2019?

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?

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 is YumYum's maximum depreciation deduction for the office building in 2018?