Exam 8: Depreciation, cost Recovery, amortization, and Depletion

Polly purchased a new hotel on July 20,2015,for $6,000,000.On January 20,2022,the building was sold.Determine the cost recovery deduction for the year of the sale.

On June 1 of the current year,Tab converted a machine from personal use to rental property.At the time of the conversion,the machine was worth $90,000.Five years ago Tab purchased the machine for $120,000.The machine is still encumbered by a $50,000 mortgage.What is the basis of the machine for cost recovery?

On June 1,2015,Gabriella purchased a computer and peripheral equipment (five-year property) for $25,000.She used the assets 40% for business,50% for the production of income,and 10% for personal use.These are the only assets Gabriella purchased during the current year.Determine her total cost recovery deduction for the current year.

Carlos purchased an apartment building on November 16,2015,for $3,000,000.Determine the cost recovery for 2015.

On April 15,2015,Sam placed in service a storage facility (a single-purpose agricultural structure) costing $80,000.Sam also purchased and planted fruit trees costing $40,000.Sam does not elect to expense any of the acquisitions under § 179,and he elects not to take additional first-year depreciation (if available).Determine Sam's cost recovery from these two items for 2015.

The maximum cost recovery method for all personal property under MACRS is 150% declining balance.

Nora purchased a new automobile on July 20,2014,for $29,000.The car was used 60% for business and 40% for personal use.In 2015,the car was used 30% for business and 70% for personal use.Nora elects not to take additional first-year depreciation.Determine the cost recovery recapture and the cost recovery deduction for 2015.

During the past two years,through extensive advertising and improved customer relations,Orange Corporation estimated that it had developed customer goodwill worth $500,000.For the current year,determine the amount of goodwill Orange Corporation may amortize.

If startup expenses total $53,000,$51,000 of those costs are amortized over 180 months.

On May 30,2014,Jane purchased a factory building to use for her business.In August 2015,Jane paid $300,000 for improvements to the building.Determine Jane's total deduction with respect to the building improvements for 2015.

Under MACRS,if the mid-quarter convention is applicable,all property sold is treated as being sold at the mid-point of the quarter in which it is placed in service.

Hans purchased a new passenger automobile on August 17,2015,for $30,000.During the year the car was used 40% for business and 60% for personal use.Determine his cost recovery deduction for the car for 2015.