Exam 20: Depreciation,cost Recovery,amortization,and Depletion

Section 179 allows taxpayers to immediately expense up to $25,000 (for 2015),subject to limitations,of the cost of real and personal property placed into service in a trade or business.

On June 30,2015,Temika purchased office furniture (7-year property)costing $22,000 and computers (5-year property)with a cost of $19,000.She uses Sec.179.Her business income is $190,000 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 2015 ?

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

On August 11,2015,Nancy acquired and placed into service residential rental property,which cost $430,000; the cost of the land has been excluded.Nancy annually elects the maximum allowed Sec.179 deduction.The total depreciation for the year is (rounded)

Under the MACRS system,if the aggregate basis of all personal property placed in service during the last three months of the year exceeds 40% of the cost of all personal property placed in service during the tax year,the mid-quarter convention is required.

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

In January of 2015,Brett purchased a Porsche for $100,000 to be used in his business.Brett drove the car 83 percent of the time for business.What is the maximum amount that Brett may deduct in 2015?

Off-the-shelf computer software that is purchased for use in the taxpayer's trade or business is amortized over 36 months,or it can be immediately expensed under a Sec.179 election.

In order for an asset to be depreciated in the year of purchase,it must be placed in service before year's end.

During the year 2015,a calendar year taxpayer,Marvelous Munchies,a chain of specialty food shops,purchased equipment as follows: Assume the property is all 5-year property.What is the maximum depreciation that may be deducted for the assets this year,2015,assuming the alternative depreciation system is not chosen?

Tessa owns an unincorporated manufacturing business.In 2015,she purchases and places in service $207,000 of qualifying five-year equipment for use in her business.Her taxable income from the business before any Sec.179 deduction is $15,000.Tessa elects to expense the maximum under Sec.179.What is Tessa's maximum total cost recovery deduction for 2015?

Taxpayers are entitled to a depletion deduction if they have an economic interest in the natural resource property.

If personal-use property is converted to trade or business use,the basis for depreciation is the lesser of adjusted basis or FMV on the date of conversion.

Jack purchases land which he plans on developing as a golf course.The land costs $20,000,000 and the cost of clearing the land,earthmoving,constructing hazards,bunkers and greens,and installing irrigation systems will cost an additional $6,000,000.What tax issues should Jack consider?

A taxpayer owns an economic interest in an oil and gas property.She is allowed to deduct the smaller of cost depletion or percentage depletion.

Residential rental property is defined as property from which more than 80% of the gross rental income is rental income from dwelling units.

For real property placed in service after 1986,depreciation under the MACRS system is calculated using the

In calculating depletion of natural resources each period,

Eric is a self-employed consultant.In May of the current year,Eric acquired a computer system (5-year property)for $7,000 and used the computer 30% for business.Eric does not use Sec.179.The maximum depreciation deduction for is

On May 1,2008,Empire Properties Corp.,a calendar year taxpayer,purchased an apartment building for $1,000,000,of which $400,000 was allocable to the land.The corporation sold the property this year on September 23,2015. a.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2008? b.What was the corporation's depreciation for the building,using statutory percentages under MACRS for 2015?