Exam 25: Depreciation, Cost Recovery, Amortization, and Depletion

On August 11, 2016, 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)

The straight-line method may be elected for depreciating tangible personal property placed in service after 1986.

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

Chahana acquired and placed in service $665,000 of equipment on August 1, 2016 for use in her sole proprietorship. The equipment is 5-year recovery property. No other acquisitions are made during the year. Chahana elects to expense the maximum amount under Sec. 179. Assuming the property does not qualify for bonus depreciation, Chahana's total deductions for the year (including Sec. 179 and depreciation) are

On January l Grace leases and places into service an automobile with a FMV of $39,000. The business use of the automobile is 60%. The "inclusion amount" for the initial year of the lease from the IRS tables is $20. The annual lease payments are $8,000. What are the tax consequences of this lease?

A large SUV is place in service in 2016. MACRS depreciation on an SUV weighing over 6,000 pounds is limited to $11,160 for the first year placed in service.

In July of 2016, Pat acquired a new automobile for $28,000 and used the automobile 80% for business. Pat can take a maximum depreciation deduction in 2016 of

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

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.

During the year 2016, a calendar year taxpayer, Marvelous Munchies, a chain of specialty food shops, purchased equipment as follows: Date Asset Cost March 3 Refrigerators 600,000 October9 Equipment 2,200,000 Assume the property is all 5-year property, but does not qualify for bonus depreciation. What is the maximum depreciation that may be deducted for the assets this year, 2016, assuming the alternative depreciation system is not chosen?

Paul bought a computer for $15,000 for business use on March 18, 2014. 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 2016. The depreciation on the computer for 2015 is

Greta, a calendar-year taxpayer, acquires 5-year tangible personal property in 2016 and places the property in service on the following schedule: Date placed in service Acquisition Cost January 15 \ 7,000 May 25 \ 10,000 November 8 \ 508,000 Greta elects to expense the maximum under Sec. 179, and selects the property placed into service on November 8. The property is not eligible for bonus depreciation. Her business 's taxable income before Sec. 179 is $790,000. What is the total cost recovery deduction (depreciation and Sec. 179) for 2016?

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?

If the business use of listed property decreases to 50% or less of the total usage, the property is subject to depreciation recapture.

Stellar Corporation purchased all of the assets of Bellavia Company as of January 1 this year for $1 million. Included in the assets acquired are the following intangible assets: Asset Useful Life Cost Patent 10 year \ 120,000 Covenant not to complete 3 years 30,000 Goodwill Indefinite 300,000 What is Stellar's maximum amortization deduction for the year?

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.

Which of the following statements regarding Sec. 179 is true?

Arthur uses a Chevrolet Suburban (GVWR 7,500 pounds) 100% for business. He acquired and placed the vehicle in service in his business in January of the current year. The vehicle cost $65,000. The maximum deduction allowed this year is

Enrico is a self-employed electrician. In May of the current year, Enrico acquired a used van (5-year property) for $12,000. He used the van 30% for business. 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, 2016. 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?