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

Fariq purchases and places in service in 2016 personal property costing $2,031,000. The property does not qualify for bonus depreciation. What is the maximum Sec. 179 deduction that Fariq can deduct, ignoring any taxable income limitation?

Terra Corporation, a calendar-year taxpayer, purchases and places into service machinery with a 7-year life that cost $640,000. Neither the mid-quarter convention, nor bonus depreciation 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 (rounded to the nearest dollar)?

William purchases nonresidential real property costing $300,000 and places it in service in March 2015. What is Lincoln's 2016 depreciation on the property?

If a new luxury automobile is used 100% for business and placed in service in 2016, the maximum MACRS depreciation on the vehicle for 2016 is $11,160.

A taxpayer owns an economic interest in an oil and gas property. She is allowed to deduct the smaller of cost depletion or percentage depletion.

In November 2016, Kendall purchases a computer for $4,000. She does not use Sec. 179 expensing, and the property does not qualify for bonus depreciation. 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?

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?

On January 1, 2016, 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: Assets Acquisition Cost Goodwill and going concern value \ 105,000 Licenses \ 45,000 Patents \ 60,000 Covenant not to compete for five years \ 120,000 What is the total amount of amortization allowed in 2016?

In the current year George, a college professor, acquired a computer system (5-year property) for $1,000 and used the computer 80% for teaching and research-related activities and the remaining 20% for personal use. Because George's employer provides him with a computer in his office at the university, the employer does not require him to have a computer at home. No election was made regarding Sec. 179. The maximum depreciation deduction is

In May 2016, 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, and the machine is not eligible for bonus depreciation. Cassie's depreciation on the machine this year is

If the business use of listed property is 50% or less of the total usage, the alternative depreciation system must be used.

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.

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

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

When a taxpayer leases an automobile for 100% business purposes, the entire lease payment is deductible.

Harrison acquires $65,000 of 5-year property in June 2014 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, 2016, what is the amount of depreciation claimed in 2016?

Ilene owns an unincorporated manufacturing business. In 2016, she purchases and places in service $2,016,000 of qualifying five-year equipment for use in her business. The property does not qualify for bonus depreciation. Her taxable income from the business before any Sec. 179 deduction is $400,000. Elaine takes the maximum allowable deduction under section 179. Which of the following statements is true regarding the Sec. 179 election?

Trenton Corporation places in service $10 million of equipment on June 1, 2016. The equipment is five-year property, and it is not "used" property. What is the maximum cost recovery deduction Trenton Corporation is allowed this year with respect to this property?

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.

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