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

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.

Everest Corp.acquires a machine (seven-year property)on January 10,2015 at a cost of $212,000.Everest makes the election to expense the maximum amount under Sec.179. a.Assume that the taxable income from trade or business is $500,000. b.Assume instead that the taxable income from trade or business is $10,000.

On April 12,2014,Suzanne bought a computer for $20,000 for business use.This was the only purchase for that year.Suzanne used the most accelerated depreciation method available but did not elect Sec.179.Bonus depreciation was not available.Suzanne sells the machine in 2015.The depreciation on the computer for 2015 is

Most taxpayers elect to expense R&E expenditures because of the immediate tax benefit.

Terra Corporation,a calendar-year taxpayer,purchases and places into service machinery with a 7-year life that cost $125,000.The mid-quarter convention does not apply.Terra elects to depreciate the maximum under Sec.179.Terra's taxable income for the year before the Sec.179 deduction is $700,000.What is Terra's total depreciation deduction related to this property?

Under the MACRS system,depreciation rates for real property must always use the mid-month convention in the year of acquisition.

Under MACRS,tangible personal property used in trade or business purchased and placed into service on March 1,2015 should be depreciated for 10 months in 2015.Assume the business uses a calendar tax year and no other tangible personal property is acquired during the year.

Unless an election is made to expense or defer and amortize research and experimental expenditures,these costs must be capitalized.

In accounting for research and experimental expenditures,all of the following alternatives are available with the exception of

Lincoln purchases nonresidential real property costing $300,000 and places it in service in March 2014.What is Lincoln's 2015 depreciation on the property?

On January 1 of the current year,Dentux Corp.purchases a patent from another corporation for $600,000.The patent has a remaining life of 10 years.The patent is the only asset purchased from that corporation.Also on January 1,Dentux purchases all of the assets of Fenton Corp.Included in the Fenton assets acquired is a patent worth $300,000 that has a 10-year remaining life.What is the allowable amortization deduction on the two patents?

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

In computing MACRS depreciation in the year of disposition of personal property used in a trade or business,the half-year convention must be applied to the amounts in the tables if the half-year convention was used in the year the asset was placed into service.

Capital improvements to real property must be depreciated over the remaining life of the property on which the improvements were made.

Atiqa took out of service and sold a residential rental property on October 31 of this year.She had originally acquired the property ten years ago.The building (excluding the value of the land)cost $1,000,000.How much is her current year depreciation deduction?

Tronco Inc.placed in service a truck costing $40,000 on January 15 of this year.On November 1,the company placed in service $200,000 of construction equipment.Tronco is a calendar year taxpayer.When calculating MACRS depreciation,Tronco must apply the mid-quarter convention to the construction equipment,but will use the half-year convention for the truck.

All of the following are true with regard to the alternative depreciation system except

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