Exam 10: Depreciation, Cost Recovery, Amortization, and Depletion

The election to use ADS is made on a year-by-year, property-class by property-class basis for real and personal property.

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, 2013. 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 2013?

Mehmet, a calendar-year taxpayer, acquires 5-year tangible personal property in 2014 and does not use Sec. 179. Mehmet places the property in service on the following schedule: What is the total depreciation for 2012?

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

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

Lincoln purchases nonresidential real property costing $300,000 and places it in service in March 2013. What is Lincoln's 2014 depreciation on the property?

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

In January of 2014, 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 2014?

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.

Joan bought a business machine for $15,000 on January 1, 2013, and later 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

Tessa owns an unincorporated manufacturing business. In 2014, 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 2014?

On August 11, 2014, 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)

Eric is a self-employed consultant. In May of the current year, Eric acquired a computer system (5-year property)for $6,000 and used the computer 80% for business and 20% for personal purposes. Eric does not take any Sec. 179 deduction. The maximum depreciation deduction for is

Harrison acquires $65,000 of 5-year property in June 2012 that is required to be depreciated using the mid-quarter convention (because of other purchases that year). He did not elect Sec. 179 immediate expensing. Bonus depreciation was not available. If Harrison sells the property on August 23, 2014, what is the amount of depreciation claimed in 2014?

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

In calculating depletion of natural resources each period,

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

This year Bauer Corporation incurs the following costs in development of new products: No benefits are realized from the research expenditures until next year. If Bauer Corporation elects to expense the research expenditures, the deduction is

Intangible drilling and development costs (IDCs)may be deducted as an expense or may be capitalized.

Greta, a calendar-year taxpayer, acquires 5-year tangible personal property in 2014 and places the property in service on the following schedule: Greta elects to expense the maximum under Section 179, and selects the property placed into service on November 8. Her business 's taxable income before section 179 is $190,000. What is the total cost recovery deduction (depreciation and Sec. 179)for 2014?