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

In August 2017,Tianshu acquires and places into service 7-year business equipment (tangible personal property qualifying under Sec.179,but not for bonus depreciation)for $70,000.This is the only asset that she purchased during the year; her taxable income from her trade or business is $23,000.She decides to limit her Sec.179 election to the maximum amount currently deductible in her business for the current year.What is her maximum cost recovery (Sec.179 and depreciation)deduction for 2017?

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

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

Taxpayers are entitled to a depletion deduction if they have an economic interest in the natural resource property.

Sec.179 tax benefits are recaptured if at any time an asset is converted to personal use.

On January 3,2014,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 2017 for those tools is (Sec.179 and bonus depreciation were not applied)

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.

Caitlyn purchases and places in service property costing $450,000 in 2017.She wants to elect the maximum Sec.179 deduction allowed.The property does not qualify for bonus depreciation.Her business income is $400,000.What is the amount of her allowable Sec.179 deduction and carryover,if any?

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

Why would a taxpayer elect to capitalize and amortize intangible drilling costs (IDCs)rather than expense such costs?

Harrison acquires $65,000 of 5-year property in June 2015 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 23,2017,what is the amount of depreciation claimed in 2017?

The election to use ADS is made on a year-by-year,property-class by property-class basis for real and personal 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 2017 is $11,160.

Ilene owns an unincorporated manufacturing business.In 2017,she purchases and places in service $2,036,000 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.Ilene takes the maximum allowable deduction under section 179.Which of the following statements is true regarding the Sec.179 election?

On October 2,2017,Dave acquired and placed into service 5-year business equipment costing $70,000.No other acquisitions were made during the year.Dave does not use Sec.179 expensing,and the property does not qualify for bonus depreciation.The depreciation for this year,using the most accelerated method possible,is

Land,buildings,equipment,and common stock are examples of tangible property.

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

Everest Corp.acquires a machine (seven-year property)on January 10,2017 at a cost of $2,042,000.Everest makes the election to expense the maximum amount under Sec.179.The property is not eligible for bonus depreciation. a.Assume that the taxable income from trade or business is $1,500,000. (1)What is the amount of the Sec.179 expensing deduction for the current year? (2)What is the amount of the Sec.179 carryover to the next tax year? (3)What is the amount of depreciation allowed? b.Assume instead that the taxable income from trade or business is $400,000. (1)What is the amount of the Sec.179 expensing deduction for the current year? (2)What is the amount of the Sec.179 carryover to the next tax year? (3)What is the amount of depreciation allowed this year?

On January 1,2017,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: What is the total amount of amortization allowed in 2017?

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