Exam 10: Depreciation, cost Recovery, amortization, and Depletion

In April of 2015,Brandon acquired five-year listed property (not an automobile)for $30,000 and used it 70% for business.No election was made regarding Sec.179 and bonus depreciation was not available.In 2016,his business use of the property dropped to 40%.Which of the following statements is true?

Personal property used in a rental activity held for investment qualifies for the Section 179 expensing election.

Which of the following statements regarding Sec.179 is true?

Quattro Enterprises,a calender year taxpayer,leases the twentieth floor of a building downtown.Due to employment expansion,it renovated the entire office space layout,spending $600,000 on these leasehold improvements.The office renovation was completed in May.Quattro also spent $500,000 on new computer systems and office furniture and fixtures in May on which the business used its entire Sec.179 allowance for 2016.What is the maximum depreciation deduction available in 2016 for the leasehold improvements?

If a company acquires goodwill in connection with the acquisition of a business,the goodwill is amortizable over a 60-month period.

In the current year George,a college professor,acquired a computer system (5-year property)for $1,000 and used the computer 80% for teaching and research-related activities and the remaining 20% for personal use.Because George's employer provides him with a computer in his office at the university,the employer does not require him to have a computer at home.No election was made regarding Sec.179.The maximum depreciation deduction is

A large SUV is place in service in 2016.MACRS depreciation on an SUV weighing over 6,000 pounds is limited to $11,160 for the first year placed in service.

Why would a taxpayer elect to use the alternative depreciation system rather than the MACRS rules?

Bert,a self-employed attorney,is considering either purchasing or leasing a $50,000 automobile for use in his business.What are the issues he should consider in making his decision?

On November 3,this year,Kerry acquired and placed into service 7-year business equipment costing $80,000.In addition,on May 5th of this year,Kerry had also placed in business use 5-year recovery property costing $15,000.Kerry did not elect Sec.179 immediate expensing,and the assets are not eligible for bonus depreciation.No other assets were purchased during the year.The depreciation for this year is

Depreciable property includes business,investment,and personal-use assets.

In April 2016,Emma acquired a machine for $60,000 for use in her business.The machine is classified as 7-year property.Emma does not expense the asset under Sec.179,and it is not eligible for bonus depreciation.Emma's depreciation on the machine this year is

The straight-line method may be elected for depreciating tangible personal property placed in service after 1986.

If the business usage of listed property is less than or equal to 50% of its total usage,depreciation is calculated using the

Under the MACRS rules,salvage value is not considered in the computation of the cost-recovery or depreciation amount.

Joan bought a business machine for $15,000.In a later year,she sold the machine for $12,800 when the total allowable depreciation is $8,500.The depreciation actually taken on the tax returns totaled $8,000.Joan must recognize a gain (or loss)of

On its tax return,a corporation will use the same depreciation,amortization and depletion methods used in its financial statements issued to shareholders.

On June 30,2016,Temika purchased office furniture (7-year property)costing $400,000 and computers (5-year property)with a cost of $250,000.She uses Sec.179,but the assets do not qualify for bonus depreciation.Her business income is $790,000 without considering Sec.179.How should she allocate the 179 election in order to maximize her total cost recovery deductions (depreciation and Sec.179)for 2016 ?

MACRS recovery property includes tangible personal and real property that is used in a trade or business.

On May 1,2012,Empire Properties Corp. ,a calendar year taxpayer,purchased an office building for $1,000,000,of which $400,000 was allocable to the land.The corporation sold the property this year on September 23,2016. a.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2012? b.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2016?