Question 1

Sec.179 tax benefits are recaptured if at any time an asset is converted to personal use.

Accepted Answer

A) True 
 B)False

Question 2

In November 2015,Kendall purchases a computer for $4,000.She does not use Sec.179 expensing.She only uses the most accelerated depreciation method possible.The computer is the only personal property which she places in service during the year.What is her total depreciation deduction for this year?

Accepted Answer

A) $200 
B) $572 
C) $800 
D) $1,000 
A) $200 
B) $572 
C) $800 
D) $1,000

Question 3

Maria,a sole proprietor,has several items of office furniture and equipment which are depreciable.All were acquired before this year.She is not required to report her depreciation deduction on form 4562.

Accepted Answer

A) True 
 B)False

Question 4

Why would a taxpayer elect to capitalize and amortize intangible drilling costs (IDCs)rather than expense such costs?

Accepted Answer

An election to expense IDCs reduces pre-

Question 5

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

Accepted Answer

A) 3) 
B) 4) 
C) 5) 
D) 6) 
A) 3) 
B) 4) 
C) 5) 
D) 6)

Question 6

In July of 2015,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.No election is made regarding Sec.179.Assuming her business use remains at 80%,Pat can take a maximum depreciation deduction in 2015 of

Accepted Answer

A) $2,528. 
B) $3,160. 
C) $5,600. 
D) $4,480. 
A) $2,528. 
B) $3,160. 
C) $5,600. 
D) $4,480.

Question 7

The Section 179 expensing election is available on an annual basis for property purchased during the year.

Accepted Answer

A) True 
 B)False

Question 8

On January 3,2012,John acquired and placed into service business tools costing $10,000.The tools have a 3-year class life.No other assets were purchased during that year.The depreciation in 2015 for those tools is (Sec.179 and bonus depreciation were not applied)

Accepted Answer

A) $0. 
B) $741. 
C) $1,920. 
D) $3,333. 
A) $0. 
B) $741. 
C) $1,920. 
D) $3,333.

Question 9

Expenditures that enlarge a building,any elevator or escalator,any structural component that benefits a common area or the internal structural framework are not considered qualified leasehold improvement property.

Accepted Answer

A) True 
 B)False

Question 10

Under the MACRS system,automobiles and computers are classified as seven-year property.

Accepted Answer

A) True 
 B)False

Question 11

Cate purchases and places in service property costing $150,000 in 2015.She wants to elect the maximum Sec.179 deduction allowed.Her business income is $20,000.What is the amount of her allowable Sec.179 deduction and carryover,if any?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 12

In May 2015,Cassie acquired a machine for $30,000 to use in her business.The machine is classified as 5-year property.Cassie does not expense the property under Sec.179.Cassie's depreciation on the machine this year is

Accepted Answer

A) $3,000. 
B) $6,000. 
C) $12,000. 
D) $15,000. 
A) $3,000. 
B) $6,000. 
C) $12,000. 
D) $15,000.

Question 13

Costs that qualify as research and experimental expenditures include all of the following except

Accepted Answer

A) depreciation of laboratory equipment. 
B) management studies. 
C) costs incurred in developing product improvements. 
D) costs of obtaining a patent such as attorney fees. 
A) depreciation of laboratory equipment. 
B) management studies. 
C) costs incurred in developing product improvements. 
D) costs of obtaining a patent such as attorney fees.

Question 14

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 23,2015.
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 2014?

Accepted Answer

a.$600,000 × .01605 = $9,630.p

Question 15

Galaxy Corporation purchases specialty software from a software development firm for use in its business as of January 1 of the current year at a cost of $90,000.No hardware was acquired.How much of the cost can Galaxy deduct this year?

Accepted Answer

A) $18,000 
B) $15,000 
C) $30,000 
D) $90,000 
A) $18,000 
B) $15,000 
C) $30,000 
D) $90,000

Question 16

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.No other assets were purchased during the year.The depreciation for this year is

Accepted Answer

A) $3,606. 
B) $6,606. 
C) $13,576. 
D) $14,432. 
A) $3,606. 
B) $6,606. 
C) $13,576. 
D) $14,432.

Question 17

Under the MACRS system,the same convention that applies in the year of acquisition (e.g.,half-year,mid-quarter,or mid-month)also applies in the year of disposition.

Accepted Answer

A) True 
 B)False

Question 18

On January 1,2015,Charlie Corporation acquires all of the net assets of Rocky Corporation for $2,000,000.The following intangible assets are included in the purchase agreement:   What is the total amount of amortization allowed in 2015?

Accepted Answer

A) $15,000 
B) $22,000 
C) $31,000 
D) $38,000 
A) $15,000 
B) $22,000 
C) $31,000 
D) $38,000

Question 19

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

Accepted Answer

Use of the alternative depreciation syst

Question 20

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

Accepted Answer

A) no gain or loss. 
B) ($3,200). 
C) $6,800. 
D) $6,300. 
A) no gain or loss. 
B) ($3,200). 
C) $6,800. 
D) $6,300.

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

Sec.179 tax benefits are recaptured if at any time an asset is converted to personal use.

In November 2015,Kendall purchases a computer for $4,000.She does not use Sec.179 expensing.She only uses the most accelerated depreciation method possible.The computer is the only personal property which she places in service during the year.What is her total depreciation deduction for this year?

Maria,a sole proprietor,has several items of office furniture and equipment which are depreciable.All were acquired before this year.She is not required to report her depreciation deduction on form 4562.

Why would a taxpayer elect to capitalize and amortize intangible drilling costs (IDCs)rather than expense such costs?

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

In July of 2015,Pat acquired a new automobile for $28,000 and used the automobile 80% for business.No election is made regarding Sec.179.Assuming her business use remains at 80%,Pat can take a maximum depreciation deduction in 2015 of

The Section 179 expensing election is available on an annual basis for property purchased during the year.

On January 3,2012,John acquired and placed into service business tools costing $10,000.The tools have a 3-year class life.No other assets were purchased during that year.The depreciation in 2015 for those tools is (Sec.179 and bonus depreciation were not applied)

Expenditures that enlarge a building,any elevator or escalator,any structural component that benefits a common area or the internal structural framework are not considered qualified leasehold improvement property.

Under the MACRS system,automobiles and computers are classified as seven-year property.

Cate purchases and places in service property costing $150,000 in 2015.She wants to elect the maximum Sec.179 deduction allowed.Her business income is $20,000.What is the amount of her allowable Sec.179 deduction and carryover,if any?

In May 2015,Cassie acquired a machine for $30,000 to use in her business.The machine is classified as 5-year property.Cassie does not expense the property under Sec.179.Cassie's depreciation on the machine this year is

Costs that qualify as research and experimental expenditures include all of the following except

Galaxy Corporation purchases specialty software from a software development firm for use in its business as of January 1 of the current year at a cost of $90,000.No hardware was acquired.How much of the cost can Galaxy deduct this year?

Under the MACRS system,the same convention that applies in the year of acquisition (e.g.,half-year,mid-quarter,or mid-month)also applies in the year of disposition.

On January 1,2015,Charlie Corporation acquires all of the net assets of Rocky Corporation for $2,000,000.The following intangible assets are included in the purchase agreement: What is the total amount of amortization allowed in 2015?

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

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

Tax Research

an Introduction to Taxation

Corporate Formations and Capital Structure

Determination of Tax

The Corporate Income Tax

Gross Income: Inclusions

Corporate Nonliquidating Distributions

Gross Income: Exclusions

Other Corporate Tax Levies

Property Transactions: Capital Gains and Losses

Corporate Liquidating Distributions

Deductions and Losses

Corporate Acquisitions and Reorganizations

Itemized Deductions

Consolidated Tax Returns

Losses and Bad Debts

Partnership Formation and Operation

Employee Expenses and Deferred Compensation

Special Partnership Issues

Corporations

Accounting Periods and Methods

The Gift Tax

Property Transactions: Nontaxable Exchanges

The Estate Tax

Property Transactions: Section 1231 and Recapture

Income Taxation of Trusts and Estates

Special Tax Computation Methods,tax Credits,and Payment of Tax

Administrative Procedures

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