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

Galaxy Corporation purchases specialty software from a software development firm for use in its business as of January 1 of the current year at a cost of $90,000.No hardware was acquired.How much of the cost can Galaxy deduct this year?

Discuss the options available regarding treatment of an amount paid in excess of the FMV of an acquired company's net assets in a business combination.

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?

Tronco Inc.placed in service a truck costing $40,000 on January 15 of this year.On November 1,the company placed in service $200,000 of construction equipment.Tronco is a calendar-year taxpayer.When calculating MACRS depreciation,Tronco must apply the mid-quarter convention to the construction equipment,but will use the half-year convention for the truck.

Mehmet,a calendar-year taxpayer,acquires 5-year tangible personal property in 2017 and does not use Sec.179.The property does not qualify for bonus depreciation.Mehmet places the property in service on the following schedule: What is the total depreciation for 2016?

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