Exam 26: Depreciation, cost Recovery, amortization, and Depletion

On January l,Grace leases and places into service an automobile with a FMV of $38,000.The business use of the automobile is 60%.The "inclusion amount" for the initial year of the lease from the IRS tables is $40.The annual lease payments are $8,000.What are the tax consequences of this lease?

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.

In November 2017,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?

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

During the year 2017,a calendar-year taxpayer,Marvelous Munchies,a chain of specialty food shops,purchased equipment as follows: 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,2017,assuming Sec.179 expensing is not elected?

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

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

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

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.

On November 3rd of this year,Kerry acquired and placed into service 7-year business equipment costing $80,000.In addition,on May 5th of this year,Kerry had also placed in business use 5-year recovery property costing $15,000.Kerry did not elect Sec.179 immediate expensing,and the assets are not eligible for bonus depreciation.No other assets were purchased during the year.The depreciation for this year is

In April of 2016,Brandon acquired five-year listed property (not an automobile)for $30,000 and used it 70% for business.No election was made regarding Sec.179 and bonus depreciation was not available.In 2017,his business use of the property dropped to 40%.Which of the following statements is true?

Maria,a sole proprietor,has several items of office furniture and equipment which are depreciable.All were acquired before this year.She is not required to report her depreciation deduction on Form 4562.

Richards Corporation reports taxable income exceeding $1.5 million per year.In 2017,it acquired and placed in service $1,610,000 of new equipment.The equipment,its only property addition this year,is five-year property and was shipped directly from the factory.What is the maximum tax deduction it can take this year with respect to this new equipment?

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

The mid-quarter convention applies to personal and real property.

Paul bought a computer for $15,000 for business use on March 18,2015.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 2017.The depreciation on the computer for 2017 is

In May 2017,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

The Section 179 expensing election is available on an annual basis for property purchased during the year.

Why would a taxpayer elect to use the alternative depreciation system rather than the MACRS rules?

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