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

On April 12, 2013, 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 2014. The depreciation on the computer for 2014 is

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

The basis of an asset must be reduced by the depreciation allowable.

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

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?

The MACRS system requires that residential real property and nonresidential rental property be depreciated using the straight-line method.

Fred purchases and places in service in 2014 personal property costing $221,000. What is the maximum Sec. 179 deduction that Fred can deduct, ignoring any taxable income limitation?

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.

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

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?

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

A large SUV is place in service in 2014. MACRS depreciation on an SUV weighing over 6,000 pounds is limited to $3,160 for the first year placed in service.

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

If a new luxury automobile is used 100% for business and placed in service in 2014, the maximum MACRS depreciation on the vehicle for 2014 is $3,160.

Ilene owns an unincorporated manufacturing business. In 2014, she purchases and places in service $206,000 of qualifying five-year equipment for use in her business. Her taxable income from the business before any Sec. 179 deduction is $17,000. Elaine takes the maximum allowable deduction under section 179. Which of the following statements is true regarding the Sec. 179 election?

Paul bought a computer for $15,000 for business use on March 18, 2012. This was his only purchase for that year. Paul used the most accelerated depreciation method available, but did not elect Sec. 179. Bonus depreciation was not available. Paul sells the machine in 2014. The depreciation on the computer for 2014 is

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

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

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

On January 3, 2011, 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 2014 for those tools is (Sec. 179 and bonus depreciation were not applied)